7. As debt is added to the capital structure, the: a. Cost of Equity Capital can be expected to rise b. Cost of Equity Capital can be expected to decline c. Cost of Debt can be expected to decline. a. 8. Which one of these statements related to growing annuities and perpetuities is correct? The cash flow used in the growing perpetuity formula is the initial cash flow at time zero. b. Growth rates cannot be applied to perpetuities if you wish to compute the present value. The present value of a growing perpetuity will decrease if the discount rate is increased c. 9. Over the last twelve months, assume you have earned 9.2 percent on your investments and there has been a 4 percent inflation rate. What was your real return? 5.2% b. 5.0% c. 4.0% a