A Company Has a Capital Structure Which Consists of 50

Multiple Choice

A company has a capital structure which consists of 50 percent debt and 50 percent equity. Which of the following statements is most correct?

A) The cost of equity financing is greater than or equal to the cost of debt financing.
B) The WACC exceeds the cost of equity financing.
C) The WACC is calculated on a before-tax basis.
D) The WACC represents the cost of capital based on historical averages. In that sense, it does not represent the marginal cost of capital.
E) The cost of retained earnings exceeds the cost of issuing new common stock.