Which of the following is typically not treated as one of the components of capital in cost of capital schedule calculations?
A) long-term debt
B) short-term debt
C) common equity
D) preferred stock
If a project is to be 100 financed with debt, then the cost of debtnot the weighted average cost of capitalshould be used to evaluate the project.
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Issuance or flotation costs are the costs investors pay to brokers when they purchase common stock.
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The cost of a firm's internal common equity is generally higher than the costs of a firm's external common equity due to issuance costs.
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The weights in a firm's weighted average cost of capital should be a measure of the firm's target capital structure.
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The cost of capital raised by the issuance of bonds is typically lower than the cost of capital raised from the issuance of preferred stock or common stock.
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Preferred stock has higher seniority than bonds and common stock.
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Funds raised by the issuance of preferred stock are not considered part of a firm's capital.
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A firm's weighted average cost of capital is a marginal measurement meaning it is concerned with measuring the cost of funds already raised and previously invested in the firm.
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Taxes are a relevant cost that should be accounted for in the firm's weighted average cost of capital.
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