Which of the Following Statements Is Most Correct

question 57

Multiple Choice

Which of the following statements is most correct?

• A) One purpose of calculating the WACC is to have a singular cost of capital measure that can be applied to evaluate all of the firm's projects,including those of greater than and lesser than average risks.
• B) A firm facing a steep demand curve (that is,high flotation costs)for new equity would likely also face,at some point,a steeply upward sloping WACC curve.
• C) A breakpoint is based on the dollar value used of a specific type of capital,and occurs at the point where the cost of that capital type increases.Thus,if a firm has $100,000 in earnings,and stockholders want $50,000 of those earnings paid as dividends,then retained earnings will have two breakpoints.
• D) Answers a and b are both correct.
• E) All of the above are false.

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Definitions:

Fair Labor Standards Act

A U.S. law that sets out various labor regulations regarding interstate commerce employment, including minimum wages, requirements for overtime pay, and limitations on child labor.

Gross Earnings

The total income earned by an individual or company before deductions such as taxes and retirement contributions.

Regular Earnings

Income received from standard work hours or salary, excluding overtime or bonuses.

FICA-OASDI

Federal Insurance Contributions Act - Old Age, Survivors, and Disability Insurance, a U.S. payroll tax that funds Social Security and is shared between employers and employees.