Consider the WACC formula, if the required rate of return on preferred stock increases, holding all else equal, the WACC increases. a) true
b) false

True

Explanation:

The Weighted Average Cost of Capital (WACC) calculates the cost of capital to a company for the means of capital it uses to finance operations. It is based on the cost and the weight of the various capital types.

Formula is;

= Cost of Equity * %Equity + Cost of debt * %Debt * ( 1 - Tax rate) + Cost of Preferred Stock * %Preferred stock

The required rate of return on preferred stock is the same as the Cost of Preferred Stock. From the formula it is shown that if this rate increases, holding all else equal, total WACC will increase.

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.

c

explanation: