Which of the Following Statements Is Correct

question 69

Multiple Choice

Which of the following statements is correct?

• A) Suppose a firm is losing money and thus,is not paying taxes,and that this situation is expected to persist for a few years whether or not the firm uses debt financing.Then the firm's after-tax cost of debt will equal its before-tax cost of debt.
• B) The component cost of preferred stock is expressed as r_ps(1 − T),because preferred stock dividends are treated as fixed charges,similar to the treatment of debt interest.
• C) The reason that a cost of capital is assigned to retained earnings is because these funds are already earning a return in the business;the reason does not involve the opportunity cost principle.
• D) The bond-yield-plus-risk-premium approach to estimating a firm's cost of common equity involves adding a subjectively determined risk-premium to the market risk-free bond rate.
• E) None of the above is a correct statement.

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Definitions:

Missing-child Poster

A public notice that displays information and a photograph of a child who has been reported missing, aimed at soliciting the public's help in locating the child.

Kidnapping

The illegal act of abducting someone typically to obtain a ransom or fulfill another motive against the victim's will.

Ambiguous Interaction

A situation or exchange where signals, intentions, or messages are unclear or have multiple interpretations, leading to uncertainty in communication.

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A loss of the ability to create new memories after the event that caused the amnesia, leading to a partial or complete inability to recall the recent past.