A. Is it true? If our cash ratio is less than 1.0, then borrowing short-term funds are using these funds to build up our cash account would cause the current ratio to increase. Explain your rationale. B. Which of the following statements is CORRECT? Explain your rationale. a. The cost of preferred stock should be expressed as fp (1-T). This follows because preferred stock dividends are treated as fixed charges, and as such they can be deducted by the issuer for tax purposes. b. No cost should be assigned to common equity because the firm does not have to pay dividends, therefore it is not company's obligations before the investors. c. Suppose a firm has been losing money and thus is not paying taxes, and this situation is expected to persist into the foreseeable future. In this case, the firm's before-tax and after-tax costs of debt for purposes of calculating the WACC will both be equal to the interest rate on the firm's currently outstanding debt, provided that debt was issued during the past 5 years. d. The target capital structure should be based on the current leverage and take into account the costs of funds raised before. e. None of the above