Which of the following statements is correct?
A)If the risk-free rate increases, it will have no impact on the weighted average cost of capital.
B)Investor returns are reduced when float costs increase, and therefore float costs reduce the weighted average cost of capital.
C)The weighted average cost of capital is a historical cost.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

Option A is incorrect because an increase in the risk-free rate affects the cost of debt, which is a component of the WACC. 
Option B is incorrect because float costs do not reduce the WACC, but rather increase the cost of equity or debt, depending on the type of float. 
Option C is incorrect because the WACC is not a historical cost, but rather a weighted average of the current cost of debt and equity. Therefore, Option D is the correct answer.

Which of the Following Statements Is Correct