1) A firm's cost of capital is influenced by

A: capital structure

B: the current ratio

C: par value of common stock

D: net income

2) In general, the least expensive source of capital is

A: debt

B: new common stock

C: retained earnings

D: preferred stock

3) The cost of retained earnings is less than the cost of new common stock because

A: flotation costs are incurred when new stock is issued

B: marginal tax brackets are not deductable

C: dividends are not tax deductible

D: accounting rules allow a deduction when using retained earnings