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7. Which of the following statements is correct? 1. If a company uses its WACC as the discount rate for all of the projects it

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7. Which of the following statements is correct? 1. If a company uses its WACC as the discount rate for all of the projects it undertakes, then the company will tend to prefer higher risk projects over lower risk projects. II. The discount rate assigned to an individual project should be based on the risks associated with the use of the funds required by the project. III. The WACC of a firm will increase as the corporate tax rate decreases. IV. A company's weighted average cost of capital remains constant when the debt-equity ratio changes. A. I and II B. II and III C. I, II, and III D. II, III and IV 8. Bob's Warehouse is considering the following projects: Project Beta IRR(actual project return) 0.6 9.8% Y 0.8 11% Z 1.15 16% Bob's Warehouse is an all-equity firm. The T-bill rate is 2.5%, and the expected return on the market is 14%. The firm has an equity beta =1. Which project(s) should the firm accept? A. Reject X, Accept Y, Accept Z B. Reject X, Reject Y, Accept Z C. Accept X, Reject Y, Reject Z D. Accept X, Reject Y, Accept Z E. Accept X, Accept Y, Reject Z

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