A tax adjustment must be made in determining the cost of


1. A tax adjustment must be made in determining the cost of

A. long-term debt.

B. common stock.

C. preferred stock.

D. retained earnings.

2. For a typical firm with a given capital structure, which of the following is correct? (Note: All rates are after taxes.)

A. rd > rs > WACC.

B. rs > rd > WACC.

C. WACC > rs > rd.

D. rs > WACC > rd.

E. None of the statements above is correct.

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Financial Management: A tax adjustment must be made in determining the cost of
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