Want to know:

Which of the following statements is CORRECT?a. If a firm has enough retained earnings to fund its capital budget, then there is no need to estimate a cost of equity when determining the WACC.b. The component cost of preferred stock is expressed as rp(1 - T). This follows because preferred stock dividends are treated as fixed charges, and as such they can be deducted by the issuer for tax purposes.c. A cost should be assigned to retained earnings due to the opportunity cost principle, which refers to the fact that the firm's stockholders could themselves earn a return on earnings if they were paid out rather than retained and reinvested.d. Suppose a firm has been losing money and thus is not paying taxes, and this situation is expected to persist into the foreseeable future. In this case, the firm's before-tax and after-tax costs of debt will both be equal to the interest rate on the firm's currently outstanding debt, which was issued during the past 5 years.e. No cost should be assigned to retained earnings because the firm does not have to pay anything to raise them-they are generated as cash flows by operating assets that were raised in the past, hence they are "free."

Get a detailed, AI-powered explanation for this question and thousands more on StudyFetch.