8. Stella has three investment options: Stock A, Stock B and Stock C. Stock A has an expected return of 14%, Stock B has an expected return of 18% and Stock C has an expected return of 8%.

The expected market return is 12%. Which stock should Stella purchase to maximize her systematic risk?

Group of answer choices

Stock B

Stock A

Stock C

Assume the current corporate income tax rate is 0%. If the rate were increased to 15%, how would this impact the after-tax cost of debt? All else equal, would firms be more or less likely to issue debt as opposed to equity?

Group of answer choices

After-tax cost of debt increases; firms are more likely to issue debt

After-tax cost of debt decreases; firms are less likely to issue debt

After-tax cost of debt increases; firms are more likely to issue debt

After-tax cost of debt decreases; firms are more likely to issue debt