ng 5% MINDAP Assignment 10-The Cost of Capital nbuiindes.htmbld 572827&nbNodeld-
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ng 5% MINDAP Assignment 10-The Cost of Capital nbuiindes.htmbld 572827&nbNodeld-207595027;&deploymentid; 55165130174650501190349062&elS8N-9781; , Due Tomorrow at 11 PM CST Attempts: Do No Harm: /2 2. The weighted average cost of capital The importance of knowing a firm's cost of capital Warm Duck Brewing Company has two divisions: one is very risky, and the other exhibits significantly less risk. The company uses its investors overall required rate of return to evaluate its investment projects. It is most likely that the firm will become O Riskier over time, and its value will increase O Less risky over time, and its value will increase O Riskier over time, and its value will decrease Less risky over time, and its value will decrease Which of the following statoments is correct? Il continuously change throughout the day, but the book value o The market value of a firm's debt and oquity wil of debt and equity tends to stay more stable over time Consequently, the tirm should use the book-value weight to define its optimal capital structure preferred stock dividends creates a tax sheite ts nonca lable bonds remains the same and all other factors are held constant O A firm's after-tax cost of preferred stock may be significantly less than its before-tax cost, because issuing hould decrease if its tax rate increases, but the yield to maturity of O A firms weighted average cost of capitalsExplanation / Answer
1) Warm Duck Brewing Company has two divisions : one very risky and the other with lesser risk.
It is most likely that the firm will become less risky over time and its value will decrease
2) When the tax rate increases, it makes the tax shield from debt more valuable, so the WACC would theoretically decrease and thus the option C should be correct
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