Which of the following statement is correct? In the dividend growth model, the annual dividend used in the computation must be for year zero (today) if you are using today's stock price to compute the return. All the answers are incorrect. To find the weighted average cost of the debt, we use market values rather than the book values. The mixture of capital used to finance a firm's assets is called the capital budgeting. The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the accounting (book) values of debt, common stock, and preferred stock. Question 2 1 pts Which of the following statement is incorrect? Most of the answers are correct. With respect to the cost of capital, we are generally interested in the cost of investing, such as NPV or IRR on a particular date. The cost of issuing the new securities, known as flotation cost, includes investment bankers'fees and commissions, and attorneys'fees Two methods to determine the cost of common equity are a) Dividend Growth Model and b) Capital Asset Pricing Model Corporations may either retain the residual earnings or return them in the form of common stock dividends