Which of the following statements is correct?
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The WACC as used in capital budgeting is an estimate of a company’s before-tax and after-tax cost of capital.
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The percentage flotation costs associated with issuing new common equity are typically smaller than the flotation costs for new debt.
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There is an opportunity cost associated with using retained earnings, hence they are not “free.”
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The WACC as used in capital budgeting will be simply the after-tax cost of debt if the firm plans to use only debt to finance its capital budget during the coming year.