Question 6 (4 points) Listen Which of the following statements is CORRECT? 1) When a corporation uses the overall corporation cost of capital, there is a risk of accepting risky projects that otherwise should be rejected and rejecting less risky projects that otherwise should be accepted. 2) In the presence of risk of financial distress and bankruptcy, the cost of debt is generally higher than the cost of equity capital. 3) With the debt capital being riskier than equity capital, the after-tax cost of debt should necessarily be greater than the WACC. 4) Because no flotation costs are required to obtain capital as retained earnings, the cost of retained earnings is generally lower than the after-tax cost of debt