1) The Fact that the interest paid on debt is a tax-deductible expensedecreases the cost of debt financing?

A. True B. False

2) When a firm is evaluating the purchase of a business that is unrelated to its current business, it is appropriate to use the current WACC of the firm that is purchasing the business?

A. True B. False

3)

Which of the following statements is MOST CORRECT?

A. The geometric average return is a better description of the long-run historical performance of an investment.

B. The geometric average return will always be above the arthematic average return, and the difference grows with the volatility of the annual returns.

C. The compounded geometric average return is most often used for compound purposes.

D. We should use the arithmetic average return when we are trying to estimate investments expected return over a future horizon based on its past performances.

E. (A), (C) and (D) are correct

F. (A) and (B) are correct.