Cost of Capital. Indicate whether each of the following statements is true or false. Explain why.
A. In practice, the component costs of debt and equity are independently, determined.
B. The marginal cost of capital will be more elastic for larger as opposed to smaller firms.
C. Information costs both increase the marginal cost of capital and reduce the internal rate of return on investment projects.
D. Investments necessary to replace worn-out or damaged equipment tend to have high levels of risk.
E. Depreciation expenses that involve no direct cash outlay must be incorporated in investment project evaluation.

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The Answer of Cost of Capital. Indicate whether each of the following statements is true or false. Explain why.
A. In practice, the component costs of debt and equity are independently, determined.
B. The marginal cost of capital will be more elastic for larger as opposed to smaller firms.
C. Information costs both increase the marginal cost of capital and reduce the internal rate of return on investment projects.
D. Investments necessary to replace worn-out or damaged equipment tend to have high levels of risk.
E. Depreciation expenses that involve no direct cash outlay must be incorporated in investment project evaluation.