We should use historical measures of the component costs from prior financings that are still outstanding when estimating a company's WACC for capital budgeting purposes.The cost of new equity $($re$)$ could possibly be lower than the cost of reinvested earnings $($rs$)$ if the market risk premium, risk$-$free rate, and the company's beta all decline by a sufficiently large amount.A company must try to adjust its current actual market value weights toward its target weights.The component cost of preferred stock is expressed as rp$(1$ T$),$ because preferred stock dividends are treated as fixed charges, similar to the treatment of interest on debt.In the WACC calculation, we must adjust the cost of preferred stock $($the market yield$)$ to reflect the fact that $50\%$ of the dividends received by corporate investors