Business, 10.04.2020 03:57 ghari112345

Which of the following statements is correct?

a) 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.

b) An increase in the flotation cost required to sell a new issue of stock will increase the cost of retained earnings.

c) 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.

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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Which of the following statements is correct?

a) When the WACC is calculated, it should...

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