9. Factors that affect the cost of capital equation 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 The general level of stock prices Interest rates in the economy The firm's capltal budgeting decision rules The firm's dividend payout ratio The impact of cost of capital on managerial decisions Consider the following case: Lancashire Raliway Company (LRC) has two divisions, L and H. Division L is the company's low.risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was ogerated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Lancashire Raliway Company (LWC) accept or reject the project? Reject the project Accept the project On what grounds do you base your accept-reject decision? Division H's project should be rejected since its fetum is less than the risk-based cost of capital for the division. Division H's project should be accepted, os its return is greater than the risk-based cost of capital for the division