Molson Coors wants to determine its cost of equity. The following data are available: D1 = $1.25; P0 = $27.50; g = 5.00% (constant); and F = 6.00%. What is the cost of equity raised by selling new common stock?

9.84%

9.06%

9.44%

10.23%

Which of the following statements is CORRECT?

The WACC as used in capital budgeting is an estimate of a company's before-tax cost of capital.

Higher flotation costs will lead to a reduction in a company's WACC.

There is an "opportunity cost" associated with using retained earnings, hence they are not "free."

The WACC as used in capital budgeting is an estimate of the cost of all the capital a company has raised to acquire its assets.