1A) What is the PallMall Corps weighted average cost of capital if its cost of pre-tax debt is 11% (25% of overall capital structure), its cost of preferred stock is 9.5% (15% of capital structure) and its cost of equity is 15.5% (60% of the capital structure)? The marginal tax rate is 35%.

	a.	12.5%
	b.	11.7%
	c.	13.5%
	d.	12.3%

1B) What is the value of a share of preferred stock paying $1.20 and the required rate of return is 8.5%?

	a.	$22.50
	b.	$14.12
	c.	$12.75
	d.	$15.50

1C) You are considering a capital acquisition; however, you are nervous about the purchase. You plan on using an NPV analysis, so what might you do to account for risky future cash flows?

(1) Require a higher risk-adjusted rate of return in the analysis

(2) Require a lower hurdle rate

(3) Project more conservative future cash flows

(4) Assume a higher earnings growth rate

	a.	1 and 2 only
	b.	1 and 3 only
	c.	2 and 3 only
	d.	2 and 4 only