Cost of capital is: the coupon rate of debt. A minimum rate of return set by the board of directors. the rate of return that must be earned on additional investment if firm value is to remain unchanged. the average cost of the firm's assets. Which of the following is a correct formula for calculating the cost of capital? WACC = weighted after-tax cost of debt + weighted cost of preferred stock + weighted cost of common stock WACC = weighted after-tax cost of debt + weighted after-tax cost of preferred stock + weighted after-tax cost of common stock. WACC = (after-tax cost of debt + cost of preferred stock + cost of common stock 1/3 WACC = weighted cost of debt + weighted cost of preferred stocks + weighted cost of common stock Which of the following statements is true? The level of general economic conditions will determine whether a firm should utilize an arithmetic average cost of capital or a weighted average cost capital. A firm should utilize a weighted average cost of capital for evaluating investment decisions rather than an arithmetic average cost of capital. For an average firm that is capitalized with 65% equity, usage of an arithmetic average cost of capital will usually overstate the true cost of capital. All of the above are true. None of the above are true. The cost of preferred stock is equal to the preferred stock dividend divided by market price. the preferred stock dividend divided by its par value. (1 - tax rate) times the preferred stock dividend divided by net price. the preferred stock dividend divided by the net market price. The most expensive source of capital is usually: preferred stock. new common stock. debt retained earnings. When calculating the weighted average cost of capital, which of the following has to be adjusted for taxes? Common stock Retained earnings Debt Preferred stock Which of the following is NOT used to calculate the cost of debt? Face value the debt Market price of the debt Number of years to maturity Risk-free rate