Which of the following statements is CORRECT?
If a companys tax rate increases but the YTM of its non-callable bonds remains the same, the after-tax cost of its debt will fall.
When calculating the cost of preferred stock, a company needs to adjust for taxes, because preferred stock dividends are tax deductible.
All else equal, an increase in a companys stock price will increase its cost of retained earnings.
Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
All else equal, an increase in a companys stock price will increase its cost of new common equity.
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