8. To calculate the cost of equity capital, your company used the Capital Asset Pricing Model. Your

company's capital structure consists of two different voting classes of common stock; cumulative

preferred stock; and three issues of debt, one senior, one collateralized, and one subordinated.

Which of the following events will produce a smaller WACC for your company?

a. An investment bank charges more underwriting costs associated with issuing cumulative

preferred stock.

b. A hike in the risk-free rate.

c. Greater risk factors changing the company's beta.

d. An increase in expected inflation.

e. A reduction in the market risk premium.