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1) A firm's cost of capital is influenced by
A: capital structure
B: the current ratio
C: par value of common stock
D: net income
2) In general, the least expensive source of capital is
A: debt
B: new common stock
C: retained earnings
D: preferred stock
3) The cost of retained earnings is less than the cost of new common stock because
A: flotation costs are incurred when new stock is issued
B: marginal tax brackets are not deductable
C: dividends are not tax deductible
D: accounting rules allow a deduction when using retained earnings
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