Basic concepts regarding the weighted average cost of capital {WAGE} M Ail a which of the following statements about a firm’s capital oomponents and its weighted average oost of capital {WACC} are true? Check all that apply. I:I A firm’s oomponent costs of capital are determined by members of the board of directors, who are elected by the investors who provide funds to the firm. I:| The oomponent oosts of capital represent the rates of return that the firm pays to use various type of funds

11. Basic concepts regarding the weighted average cost of capital {WAGE} M Ail a which of the following statements about a firm’s capital oomponents and its weighted average oost of capital {WACC}
are true? Check all that apply. I:I A firm’s oomponent costs of capital are determined by members of the board of directors, who are elected by
the investors who provide funds to the firm. I:| The oomponent oosts of capital represent the rates of return that the firm pays to use various type of funds
that are provided by investors. I:| The cost of capital. or required rate of return. that a firm should use when making an investment decision is
calculated as a weighted average. or oom bination, of the various types of funds generally used. regardless of
which specific type of financing the firm plans to use to fund the project if it is purchased. I:I The oost of retained earnings, r5, for a particular firm is greater than the oost of new equity. re, because
retained earnings represent inoome that oould have been paid to stockholders in the form of dividends. As a
result, stockholders require a much higher rate of return when the firm retains earnings than when it issues
new stock.

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