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2. All else equal, a higher corporate tax rate will increase the tax shelter and, therefore, a) Will increase the WACC of a firm with

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2. All else equal, a higher corporate tax rate will increase the tax shelter and, therefore, a) Will increase the WACC of a firm with debt and equity in its capital structure b) Will decrease the WACC of a firm with debt in its capital structure c) Will not affect the WACC of a firm with debt in its capital structure d) Will decrease the WACC of a firm with only equity in its capital structure e) Will change the WACC of a firm with deb in its capital structure, but the direction of the change cannot be determined without more information 3. A Beta equal to 1.2 indicates that a company's stock price volatility is: a) Slightly above the market level of volatility b) Equal to the market level of volatility c) Slightly below the market level of volatility d) Too little information to form a conclusion 4. In calculating WACC, we should use which of the following to determine the weight of equity financing: a) The common stock equity account on the firm's balance sheet b) The sum of common stock and preferred stock on the balance sheet c) The total book value of the firm as reflected on the balance sheet d) The market value of the common stock S. The beta coefficient reflects a) how safe a common stock is b) the best price to pay for a share of stock c) a given stock's volatility relative to that of the broad market d) the movement of a stock's price relative to the risk-free rate Dr. wanabee is considering an investment with a beta coefficient of 2.00. The risk-free rate is 4% and the market return is 10%, using the Capital Asset Pricing Model, what is the expected return on this 6, investment? a) 16% b) 10% c) 24% d) 12%

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