Identify each of the following statements as true or false, and explain your answers.
A. Information costs both increase the marginal cost of capital and reduce the internal rate of return on investment projects.
B. Depreciation expenses involve no direct cash outlay and can be safely ignored in investment-project evaluation.
C. The marginal cost of capital will be less elastic for larger firms than for smaller firms.
D. In practice, the component costs of debt and equity are jointly rather than independently determined.
E. Investments necessary to replace worn-out or damaged equipment tend to have low levels of risk.