Which of the following statements is most correct?
A) Since stockholders do not generally pay corporate taxes, corporations should focus on before-tax cash flows when calculating the weighted average cost of capital (WACC).
B) When calculating the weighted average cost of capital, firms should include the cost of accounts payable.
C) When calculating the weighted average cost of capital, firms should rely on historical costs rather than marginal costs of capital.
D) Answers a and b are correct.
E) None of the answers above is correct.

Question

Quizplus · Accepted Answer

Corporations should focus on after-tax cash flows for WACC, accounts payable is not a cost of capital, and WACC should be based on marginal costs, not historical costs.

Which of the Following Statements Is Most Correct