Author Question: Which statement regarding cost of capital is true? (Read 60 times)

903f23fj0 · **on:** Aug 7, 2023

Which statement regarding cost of capital is true?

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Lower flotation costs tend to increase the cost of equity capital.

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The tax-adjusted cost of debt is always greater than the interest rate on debt, provided the company does in fact pay taxes.

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Because no flotation costs are required to obtain capital as retained earnings, the cost of retained earnings is generally lower than the after-tax cost of debt.

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If a company assigns the same cost of capital to all of its projects regardless of each project’s risk, then the company is likely to reject some safe projects that it should accept and to accept some risky projects that it should reject.

viper01 · **Reply #1 on:** Aug 7, 2023

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