13. Which of the following statements is CORRECT? a. In the WACC calculation, yield) to reflect the fact that 70% of the dividends r we must adjust the cost of preferred stock (the market are excluded from their taxable income b. We should use historical received by corporate investors that are still outstanding when estimating a companys w budgeting purposes. measures of the component costs from prior financings ACC for capital c. The cost of new equity (re) could possibly be lower than the cost of retained earnings (rs) if the market risk premium, risk-free rate, and the company's beta a decline by a sufficiently large amount. d. its cost of retained earnings is the rate of return stockholders require on a firm's common stock. The preferred stock dividends are treated as fixed charges, similar to the treatmer com ponent cost of preferred stock is expressed as rp(1-T), because interest on debt. 14. Which of the following statements is CORRECT? a. The WACC is calculated using before-tax costs for all components. b. The after-tax cost of debt usually exceeds the after-tax cost of equity. c. For a given firm, the after-tax cost of debt is always more expensive than after-tax cost of non-convertible preferred stock. d. Dividends that were generated in the past and are reported on the firm's sheet are available to finance the firm's capital budget during the comin e. The WACC that should be used in capital budgeting is the firm's margir tax cost of capital. 15. Which of the following statements is CORRECT? a. The component cost of preferred stock is expressed as rp(1-T). T because preferred stock dividends are treated as fixed charges, an they can be deducted by the issuer for tax purposes. b. A cost should be assigned to retained earnings due to the opportuni which refers to the fact that the firm's stockholders would thems earn a return on earnings that were paid out rather than retained No cost should be assigned to retained earnings because the fim to nay anvthing to raise them. They are generated as cash fiow