10.8, 2

8. Factors that affect the WACC equation Aa Aa a Each of the following factors affects the weighted average cost of capital (wAcc equation. which of the following factors are outside a firm's control? Check all that apply. The firm's dividend payout ratio The general level of stock prices The effect of the tax rate on the cost of debt in the weighted average cost of capital equation The impact of cost of capital on managerial decisions Consider the following case: International Imports (12) has two divisions, Land H. Division L is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division His high-risk division and would have a weighted average cost of capital of 14% if it was operated an independent as company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of Division His considering project with an expected return of 12%. Should International Imports (12) accept or reject the project? Q Accept the project O Reject the project