Which one of the following statements is correct concerning the weighted average cost of capital (WACC) ?
A) The pre-tax rate of return on the debt is the rate that is relevant to the computation of the WACC.
B) When computing the WACC, the weight assigned to the preferred stock is equal to the coupon rate multiplied by the par value assigned to the preferred stock.
C) A firm's WACC will decrease as their corporate tax rate decreases.
D) The weight of the common stock used in the computation of the WACC is based on the number of shares outstanding multiplied by the book value per share.
E) The weight of the debt can be based on the face value of the bond issue(s) outstanding multiplied by the quoted price(s) when expressed as a percentage of the face value.
Correct Answer:
Verified
Q77: The cost of preferred stock is computed
Q78: Preferred stock constitutes what percentage of the
Q79: As a newly hired financial analyst,your first
Q80: Use the data provided on Cadbury to
Q81: What is the weighted average cost of
Q83: Doing a single corporate WACC is always
Q84: The proportions of the market value of
Q85: Swanson & Sons has two separate divisions.Each
Q86: The pre-tax cost of debt is 11%,preferred
Q87: What is the weighted average cost of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents