Which of the Following Statements Is Correct

question 118

Multiple Choice

Which of the following statements is correct?

• A)The WACC measures the before-tax cost of capital.
• B)An increase in the firm's marginal corporate tax rate will decrease the weighted average cost of capital.
• C)Flotation costs can decrease the weighted average cost of capital.
• D)None of these statements is correct.

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Definitions:

Expansionary Monetary Policy

A form of macroeconomic policy that aims to increase the money supply and typically lower interest rates to stimulate economic growth.

Discount Rate

The rate at which central banks lend to commercial banks or other financial institutions.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, bills, and notes, which are considered low-risk investments.

Required Reserve Ratio

The fraction of deposits that a bank must hold in reserve and cannot lend out, set by the central bank to control the money supply.