1. A tax adjustment must be made in determining the cost of
A. long-term debt.
B. common stock.
C. preferred stock.
D. retained earnings.
2. For a typical firm with a given capital structure, which of the following is correct? (Note: All rates are after taxes.)
A. rd > rs > WACC.
B. rs > rd > WACC.
C. WACC > rs > rd.
D. rs > WACC > rd.
E. None of the statements above is correct.