1. If a firm's marginal tax rate is increased, this would affect the cost of debt used to calculate its WACC.

a. True

b. False

2. Funds acquired by the firm through retaining earnings have no cost because there are no dividend or interest payments associated with them, and no flotation costs are required to raise them, but capital raised by selling new stock or bonds does have a cost.

a. True

b. False

3. Capital components are sources of funding that come from investors and suppliers: debt, preferred stock, common equity, accounts payable.

a. True.

b. False.