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Cost of preferred stock used to calculate its wacc

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Reference no: EM132131500

A. If a firm's marginal tax rate is increased, this would affect the cost of preferred stock used to calculate its WACC. T/F

B. Suppose the debt ratio (Debt to total assets) is 30%, the current cost of debt is 8%, the current cost of equity is 15%, and the tax rate is 38%. An decrease in the debt ratio to 25% would increase the weighted average cost of capital (WACC). T/F

C. For a typical firm, which of the following sequences is CORRECT? All rates are after taxes, and assume the firm operates at its target capital structure.

a. rpreferred_stock > requity > > rdebt

b. rdebt > rpreferred_Stock > > requity

c. requity > rdebt > > rpreferred_stock

d. requity > rpreferred_Stock > > rdebt

Reference no: EM132131500

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