Which of the following statements is correct?
A)Suppose a firm is losing money and thus, is not paying taxes, and that this situation is expected to persist for a few years whether or not the firm uses debt financing.Then the firm's after-tax cost of debt will equal its before-tax cost of debt.
B)The component cost of preferred stock is expressed as rps(1 − T), because preferred stock dividends are treated as fixed charges, similar to the treatment of debt interest.
C)The reason that a cost of capital is assigned to retained earnings is because these funds are already earning a return in the business, the reason does not involve the opportunity cost principle.
D)The bond-yield-plus-risk-premium approach to estimating a firm's cost of common equity involves adding a subjectively determined risk-premium to the market risk-free bond rate.
E)None of the above is a correct statement.

Question

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The Answer of Which of the following statements is correct?
A)Suppose a firm is losing money and thus, is not paying taxes, and that this situation is expected to persist for a few years whether or not the firm uses debt financing.Then the firm's after-tax cost of debt will equal its before-tax cost of debt.
B)The component cost of preferred stock is expressed as rps(1 − T), because preferred stock dividends are treated as fixed charges, similar to the treatment of debt interest.
C)The reason that a cost of capital is assigned to retained earnings is because these funds are already earning a return in the business, the reason does not involve the opportunity cost principle.
D)The bond-yield-plus-risk-premium approach to estimating a firm's cost of common equity involves adding a subjectively determined risk-premium to the market risk-free bond rate.
E)None of the above is a correct statement.

Which of the Following Statements Is Correct