Question
For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is CORRECT? a. The interest
For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is CORRECT?
| a. The interest rate used to calculate the WACC is the average after-tax cost of all the companys outstanding debt as shown on its balance sheet. | ||
| b. The WACC is calculated on a before-tax basis. | ||
| c. The WACC exceeds the cost of equity. | ||
| d. The cost of equity is always equal to or less than the cost of debt. | ||
| e. The cost of retained earnings typically exceeds the cost of new common stock. |
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International Finance
Authors: Keith Pilbeam
5th Edition
1350347094, 978-1350347090
