28. You are considering an investment project. You know that the cost of capital associated with the project depends mostly on ____________.

A. the total risk of the firm's equity

B. the type of security to be issued to finance the project

C. the type of assets needed for the project, that is, whether they are long-term or short-term assets

D. the interest rate on the firm's existing long term bonds

E. the risk associated with the project

29. All else equal, a higher corporate tax rate ________.

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 equity in its capital structure

E. will change the WACC of a firm with debt in its capital structure, but the direction of the change cannot be determined without more information

30. Which of the following is correct about the use of the CAPM model to compute the cost of equity?

A. The estimated cost of equity is sensitive to the estimated dividend growth rate

B. The approach does not require a dividend

C. The approach requires one to assume that the dividend growth rate will remain constant

D. The approach requires dividend growth become a constant rate at some point in the future

E. The approach is sensitive to the capital gains rate