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Which of the following statements is NOT CORRECT?     

The cost of capital used in capital budgeting should reflect the average cost of the various types of capital a firm uses to finance the projects.

The cost of equity is a market-determined variable in the sense that it’s shareholders’ required return.

The after-tax cost of debt, which is lower than then before-tax cost, is used as the component cost of debt for purposes of developing the firm’s WACC.

The cost of preferred stock to a firm must be adjusted to an after-tax figure because 70% of preferred dividends received by a corporation may be excluded from the receiving company’s taxable income.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92744225

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