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 a company's cost of equity exceeds its pretax cost of debt. Given this assumption and assuming all else is held constant, the company's WACC must increase if the points Multiple Choice eBook O tax rate decreases. Print O company's beta decreases. References O pretax cost of debt decreases. O debt-to-equity ratio decreases. O market risk premium decreases.

2 When computing the weights to be used in a project's WACC equation, you should use the 1 points Multiple Choice eBook O proportions of debt and equity that will finance the project. Print O current market values of debt and equity. References O average market weights of debt and equity that are expected over the project's life. O average book weights of debt and equity that are expected over the project's life. O current book values of debt and equity.

3 Check WACC? The UpTowner has a beta of 1.18, a debt-to-equity ratio of .36, and a cost of equity of 11.74 percent. The market rate of return is 10.4 percent and the tax rate is 35 percent. If the pretax cost of debt is 6.9 percent, what is the company's points Multiple Choice BOOK O 9.82%% Print References O 8.90% O 10.41% O 9.96% O 10.12%

5 CTO Transport has an aftertax cost of debt of 5.6 percent, a cost of equity of 13.7 percent, and a cost of preferred stock of 7.8 percent. The firm has 60,000 shares of common stock outstanding at a market price of $45 per share. There are 12,000 shares of preferred stock outstanding at a market price of $52 per share. The bond issue has a total face value of $400,000 and sells at 102 percent of face value. The tax rate is 35 percent. What is the company's WACC? points Multiple Choice Book O 11.83% Print References O 12.06% O 12.42% O 11.39% O 10.87%

6 The Bell Jar has a target WACC of 9.5 percent. The firm has an aftertax cost of debt of 5.4 percent and a cost of equity of 14 percent. What debt-to-equity ratio is needed for the firm to achieve its target WACC? 1 points Multiple Choice eBook O 75 Print O .67 References O 1.10 O 93 O 1.06