Which of the following statements is most 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 kps(1 – T), because preferred stock dividends are treated as fixed charges, similar to the treatment of debt interest.
c.The reason that a cost 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.All of the statements above are false
Which of the following statements is most correct?
No comments:
Post a Comment