Question 1 - When determining relevant cash flows for project evaluation, we should _____.

• discount interest expenses to the present
• add back in interest expenses after subracting taxes
• ignore interest and other financing expenses
• subtract interest expenses from EBIT

Question 2 - Sunk costs are costs that _____.

• may change based on the NPV of the project
• will occur in the future
• have been incurred in the past and cannot be recouped fully
• are due to a sunken ship

Question 3 - Daytona Racing Inc. has a capital structure of 21% debt and 79% common stock. The expected return on the firm's debt is 5% and the expected return on the firm's equity is 11%. Assume perfect capital markets. What is the company's WACC?