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Which of the following statements is CORRECT? Of the three methods for estimating the cost of equity from retained earnings identified in the textbook, only
Which of the following statements is CORRECT? Of the three methods for estimating the cost of equity from retained earnings identified in the textbook, only the DCF method is widely used in practice. The before-tax cost of debt rather than the after-tax cost should be used as the component cost of debt for purposes of developing a company's WACC. The lower the firm's tax rate, the higher will be its after-tax cost of debt and also its WACC, other things held constant. Typically, the average flotation cost of new common stock is much lower than the average flotation cost for new debt
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