1.Which of these completes this statement to make it true? The constant growth model is

always going to have assumptions that will hold true.

able to be adjusted for stocks that don't expect constant growth without sizeable errors.

only going to be appropriate for the limited number of stocks that just happen to expect constant growth.

only going to be appropriate for the limited number of stocks that just happen to expect nonconstant growth.

2.This is an estimated WACC computed using some sort of proxy for the average equity risk of the projects in a particular division.

	Average WACC
	Divisional WACC
	Proxy WACC
	Pure-play WACC

3.Which of these makes this a true statement? When determining the appropriate weights used in calculating a WACC, it should reflect

	the relative sizes of the total book capitalizations for each kind of security that the firm issues.
	the relative sizes of the total market capitalizations for each kind of security that the firm issues.
	only the market after-tax cost of debt.
	only the market after-tax cost of equity.

4.CJ Co stock has a beta of 0.9, the current risk-free rate is 5.6, and the expected return on the market is 13 percent. What is CJ Co's cost of equity?

	12.26%
	17.30%
	19.50%
	22.34%

5.WC Inc. has a $10 million (face value), 10-year bond issue selling for 99 percent of par that pays an annual coupon of 9 percent. What would be WC's before-tax component cost of debt?

	9.00%
	9.10%
	9.16%
	18.32%

6.Fern has preferred stock selling for 95 percent of par that pays an 8 percent annual coupon. What would be Fern's component cost of preferred stock?

	7.60%
	8.00%
	8.42%
	9.00%

7.Rose has preferred stock selling for 99 percent of par that pays a 9 percent annual coupon. What would be Rose's component cost of preferred stock?

	4.55%
	8.91%
	9.00%
	9.09%

8.PNB Industries has 20 million shares of common stock outstanding with a market price of $18.00 per share. The company also has outstanding preferred stock with a market value of $50 million, and 500,000 bonds outstanding, each with face value $1,000 and selling at 97% of par value. The cost of equity is 15%, the cost of preferred is 12%, and the cost of debt is 8.50%. If PNB's tax rate is 40%, what is the WACC?

	7.05%
	9.47%
	11.31%
	11.83%

9.Suppose that TW, Inc. has a capital structure of 25 percent equity, 15 percent preferred stock, and 60 percent debt. If the before-tax component costs of equity, preferred stock and debt are 13.5 percent, 9.5 percent and 4 percent, respectively, what is TW's WACC if the firm faces an average tax rate of 30%?

	6.19%
	6.48%
	7.2%
	9.0%