1. Indicate whether each of the following actions would increase or decrease a firm's WACC. points) (3 a. Investors become less risk averse. b. A

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1. Indicate whether each of the following actions would increase or decrease a firm's WACC. points) (3 a. Investors become less risk averse. b. A fimm is in the business of solar energy and is the beneficiary of a series of tax breaks. c. A firm uses less debt (decreases their debt ratio) 2. Bania Manufacturing sells on terms of 2/10, net 30. Total annual sales are $8,750,000. 40% of the customers pay on the 10th day and take discounts, 40% pay in 30 days and the remaining customers payon average, 60 days after their purchases (4 points) a What is the Bania's accounts receivable balance? 6. What is the nominal cost of trade credit to Lose customers that pay 60 days after their purchases? 3. Managers of Play Now Inc are determining the company's capital budget for the next year and are considering the following projects: (4 points) Risk 9 S. Project Size IRR A S525,000 13% High B 450.000 11. High 375,000 10 Average 390,000 Average 220,000 Low 120,000 71259 Low Play Now estimates that its WACC 1s 9.15% and this rate would be applicable to average-risk projects. All projects are independent. The company adjusts for risk by adding 2.25% to the WACC for high-risk projects and subtracting 2.25% from the WACC for low-risk projects. a Which of the above projects should Play Now accept? b. If there are no capital constraints, what will the size of Play Now's capital budget be