19. A corporate bond has a face value of $1,000 and a coupon rate of 5%. The bond matures in 15 years and has a current market price of $925. If the corporation sells more bonds, it will incur flotation costs of $25 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital?

		5.29%
		4.45%
		3.74%
		6.78%

9. Fixed costs per unit vary inversely with production output. t/f?

7. Sales of consumer durable goods, such as appliances, are more sensitive to swings in the business cycle, and therefore companies in these industries face a higher level of operating risk. t/f?

5. The Modigliani and Miller hypothesis does NOT work in the "real world" because

		higher levels of debt increase the likelihood of bankruptcy, and bankruptcy has real costs for any corporation.
		interest expense is tax deductible, providing an advantage to debt financing.
		dividend payments are fixed and tax deductible for the corporation.
		both A and B