Which Statement is CORRECT?

a$.$In general, firms should use their weighted average cost of capital $($WACC$)$ to evaluate capital budgeting projects because most projects are funded with general corporate funds, which come from a variety of sources. However, if the firm plans to use only debt or only equity to fund a particular project, it should use the after$-$tax cost of that specific type of capital to evaluate that project.

b$.$"Capital" is sometimes defined as funds supplied to a firm by investors.

c$.$When estimating the cost of equity by use of the CAPM, three potential problems are $(1)$ whether to use long$-$term or short$-$term rates for rRF$,(2)$ whether or not the historical beta is the beta that investors use when evaluating the stock, and $(3)$ how to measure the market risk premium, RPM$.$ These problems leave us unsure of the true value of rs$.$

d$.$Suppose the debt ratio is $50\%,$ the interest rate on new debt is $8\%,$ the current cost of equity is $16\%,$ and the tax rate is $40\%.$ An increase in the debt ratio to $60\%$ would have to decrease the weighted average cost of capital $($WACC$).$

e$.$The cost of common equity obtained by retaining earnings is the rate of return the marginal stockholder requires on the firm's common stock.

f$.$The before$-$tax cost of debt, which is lower than the after$-$tax cost, is used as the component cost of debt for purposes of developing the firm's WACC.