Question 7 15 pts Based to the pecking order theory, which one of the following statements is true? To satisfy funding needs, firms should first use their internal funds, then issue debt and lastly issue equity There is no relationship between a firm's profit level and its debt level There exists an optimal debt ratio that firms should try to reach Only firms will outstanding profitability should consider issuing equity to obtain capital above, under any circumstances

Question 7 15 pts Based to the pecking order theory, which one of the following statements is true? To satisfy funding needs, firms should first use their internal funds, then issue debt and lastly issue equity There is no relationship between a firm's profit level and its debt level There exists an optimal debt ratio that firms should try to reach Only firms will outstanding profitability should consider issuing equity to obtain capital
above, under any circumstances. Question 8 15 pts A firm has an after-tax cost of debt of 8%, and 40 % of its assets are financed though debt. The frim has a beta of 1.5. The required rate of return on the market portfolio is 12%, and the risk free rate is 2%. Based on CAMP what is the WACC of the frim (Hint: First, compute the cost of equity using CAPM) 11.6% 13.49 12.8% @ 15.2%