1. For a firm, the weighted average cost of capital represents the

a. cost of its average project

b. expected cost of raising capital

c. none of the above

d. sum of the capital costs of all its projects

e hurdle rate for all projects

2. For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is CORRECT.

A The cost of retained earnings typically exceeds the cost of new common stock

B The interest rate used to calculate the WACC is the average after-tax cost of all the companys outstanding debt as shown on its balance sheet.

C The WACC is calculated on a before-tax basis.

D The cost of equity is always equal to or greater than the cost of debt.

E The WACC exceeds the cost of equity.