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Which of the following statements is most correct? Question 8 options: Since stockholders do not generally...

Which of the following statements is most correct?

Question 8 options:

Since stockholders do not generally pay corporate taxes, corporations should focus on before-tax cash flows when calculating the weighted average cost of capital (WACC).

When calculating the weighted average cost of capital, firms should include the cost of accounts payable.

When calculating the weighted average cost of capital, firms should rely on marginal costs rather than historical costs of capital.

Answers a and b are correct

None of the answers above is correct.

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Homework Answers

Answer #1

Statement (C) is correct which will state that the firms should be accounting for the marginal cost rather than historical cost when calculation of the weighted average cost of capital because when the firm will be trying to calculate the weighted average cost of capital it should be trying to discount the marginal cost rather than the historical cost so given statement is true.

All the other statement are representing wrong statements and they are False

Correct answer will be option(C) when calculating the weighted average cost of capital firm should rely on marginal cost rather than historical cost.

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