1. Homemade capital structure occurs when:

Group of answer choices

Shareholders double their shareholdings to double their gains in up markets and double their loses in down markets.

Shareholders borrow or lend to recreate the cash flows that would occur if the firm had changed its capital structure.

Shareholders sell shares every 3 months to create a pseudo dividend stream.

Shareholders sell all of their shares to avoid the risk of stock loses.

2. The weighted average cost of capital (WACC) is defined as the weighted average of a firm's:

Group of answer choices

bond coupon rates.

cost of equity and its after-tax cost of debt

pretax cost of debt and equity securities.

return on its fixed investments.

3. D.R. Mathews, Inc. has a 6 percent bonds outstanding that mature in 5 years. The bonds pay interest semiannually and have a face value of $1,000. Currently, the bonds are selling for $989 each.

What is D.R. Mathews annualized pre-tax cost of debt?

Group of answer choices

6.26 percent

3.13 percent

7.23 percent

4.76 percent