1. The flotation cost of internal equity is:

Multiple Choice

a. assigned a cost equal to the aftertax cost of equity.

b.Incorrect assumed to be the same as the cost of external equity.

c.assumed to be zero.

d. assumed to be the same as the firm's return on equity.

e.assigned a cost equal to the risk-free rate.

2. Which one of these statements related to beta is correct?

Multiple Choice

a. Firm betas have less error than industry betas.

b.Firms should always rely on their own beta rather than their industry's beta.

c.The sample size used to compute beta may be too small to yield a reliable result.

d.Firm betas rarely vary over time.

e. Beta is unaffected by a firm's capital structure.