Which of the following statements is CORRECT? Question 7 options: The WACC is ca
ID: 2712980 • Letter: W
Question
Which of the following statements is CORRECT?
Question 7 options:
The WACC is calculated using before-tax costs for all components.
The after-tax cost of debt usually exceeds the after-tax cost of equity.
For a given firm, the after-tax cost of debt is always more expensive than the after-tax cost of non-convertible preferred stock.
The WACC that should be used in capital budgeting is the firm's marginal, after-tax cost of capital.
The WACC is calculated using before-tax costs for all components.
The after-tax cost of debt usually exceeds the after-tax cost of equity.
For a given firm, the after-tax cost of debt is always more expensive than the after-tax cost of non-convertible preferred stock.
The WACC that should be used in capital budgeting is the firm's marginal, after-tax cost of capital.
Explanation / Answer
For a given firm, the after-tax cost of debt is always more expensive than the after-tax cost of non-convertible preferred stock.
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