Which of the Following Statements Is Most Correct

question 27

Multiple Choice

Which of the following statements is most correct?

• A) The before-tax cost of preferred stock may be lower than the before-tax cost of debt,even though preferred stock is riskier than debt.
• B) If a company's stock price increases,this increases its cost of equity capital.
• C) If the cost of equity capital is low enough,it may be cheaper to issue common stock than it is to finance projects with retained earnings.
• D) Both a and b are correct.
• E) Answers a,b,and c are all correct.