6. Factors that affect the WACC equation Aa Aa E Each of the following factors affects the weighted average cost of capital (WACC) equation. Which are factors that a firm cannot control? Check all that apply. Altering its investment policy Changing its capital structure Changing its dividend payout ratio Tax rates O The impact of cost of capital on managerial decisions Consider the following case: McFann Co. has two divisions, L and H. Division L is the company's low-risk division and would have a WACC of 8% if it were operated as an independent company. Division H is the company's high-risk division and would have a WACC of 14% if it were operated as an independent company. Because the two divisions are the same size, the company has a composite WACC of 11%. Division H is considering a project with an expected return of 12%. Should McFann Co. accept or reject the project? O Reject Accept On what grounds do you base your accept-reject decision? Division H's project should be accepted, because its return is greater than the risk-based cost of capital for the division. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division