Which one of the following statements is correct concerning the weighted average cost of capital (WACC)? a) The WACC may decrease as a firm's debt-equity ratio increases. b) In the computation of WACC, weight assigned to the preferred stock is based on the coupon rate multiplied by the par value of the stock. c) A firm's WACC will decrease as the 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.

Which one of the following statements is correct concerning the weighted average cost
of capital (WACC)?
a) The WACC may decrease as a firm's debt-equity ratio increases.
b) In the computation of WACC, weight assigned to the preferred stock is based on the
coupon rate multiplied by the par value of the stock.
c) A firm's WACC will decrease as the 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.
by

1 Answer

Answer :

a) The WACC may decrease as a firm's debt-equity ratio increases.
by

Related questions

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Last Answer : a) Rs.1.20 crore

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Last Answer : B. Partly Convertible Debentures (PCD) Explanation: A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.

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Last Answer : (a) merit rating

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