Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A) An increase in the flotation cost required to sell a new issue of stock will increase the cost of retained earnings.
• B) An increase in a firm's tax rate will increase the component cost of debt, provided the YTM on the firm's bonds is not affected.
• C) When the WACC is calculated, it should reflect the cost of new common stock, retained earnings, preferred stock, long-term debt, short-term bank loans if the firm normally finances with bank debt, and accounts payable if the firm normally has accounts payable on its balance sheet.
• D) If a firm has been suffering accounting losses that are expected to continue into the foreseeable future, and therefore its tax rate is zero, then it is possible for the after-tax cost of preferred stock to be less than the after-tax cost of debt.

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Definitions:

Ciliated Larvae

Larval forms of certain aquatic animals, particularly some mollusks and annelids, which have cilia (tiny hair-like structures) for movement and feeding.

Jellylike Matrix

A viscous, gelatinous substance that provides structural support to various tissue types, such as the connective tissue.

Gastrovascular Cavity

A saclike gut that also functions in gas exchange.

Cnidarians

A phylum of aquatic invertebrates known for their distinctive body structure featuring a jelly-like substance called mesoglea, and their tentacles equipped with cnidocytes for prey capture and defense.