Which of the Following Statements Is Correct

Multiple Choice

Which of the following statements is correct?

A) Suppose a firm is losing money and thus, is not paying taxes, and that this situation is expected to persist for a few years whether or not the firm uses debt financing.Then the firm's after-tax cost of debt will equal its before-tax cost of debt.
B) The component cost of preferred stock is expressed as rps(1 − T) , because preferred stock dividends are treated as fixed charges, similar to the treatment of debt interest.
C) The reason that a cost of capital is assigned to retained earnings is because these funds are already earning a return in the business, the reason does not involve the opportunity cost principle.
D) The bond-yield-plus-risk-premium approach to estimating a firm's cost of common equity involves adding a subjectively determined risk-premium to the market risk-free bond rate.
E) None of the above is a correct statement.