1. In Chapter 8 Figure 8.1 (known as the market line or the risk return trade off line) why should a company reject investment opportunities lying below the market line and accept those lying above the market line ?

2. How will an increase in financial leverage affect a company's cost of equity capital ? How will it affect a company's beta equity ?

3. Waste Management's annual dividend is $1.50 / share and its current stock price is $44.50. Assuming a 4% annual growth rate in dividends, what is Waste Management's cost of equity ?

4. The Coca-Cola Company's beta is 0.73. The long-term government bond rate is 2.0%. Assuming 6.3% for the historical excess return on common stocks, what is Coca-Cola's cost of equity capital ?