1. Which of the following states the component cost preferred stock? (f is the flotation cost percent, D _p is the annual preferred dividend, and k _p is the preferred's market yield on the preferred stock?

	a.	Dp [1 - f]
	b.	Dp [kp + f]
	c.	kp [1 + f]
	d.	kp [1 - f]

2. To determine a firm's WACC, it is necessary to compensate for the effect of:

	a.	transaction costs associated with doing business in financial markets.
	b.	the tax implications of debt.
	c.	None of the above
	d.	Both a and b