9. The weighted average cost of capital Aa Aa The importance of knowing a firm's cost of capital Blue Oyster Seafood Company has two divisions: one is very risky, and the other exhibits significantly less risk. The company uses its investors' overall required rate of return to evaluate its investment projects. It is most likely that the firm will become: Less risky over time, and its value will increase O Less risky over time, and its value will decrease Riskier over time, and its value will decrease O Riskier over time, and its value will increase Which of the following statements is correct? The market value of a firm's debt and equity will continuously change throughout the day, but the book value of debt and equity tends to stay more stable over time. Consequently, the firm should use the book-value weight to define its optimal capital structure. O A firm's after-tax cost of preferred stock may be significantly less than its before-tax cost, because issuing preferred stock dividends creates a tax shelter. O A firm's weighted average cost of capitalshould decrease if its tax rate increases, but the yield to maturity of its noncallable bonds remains the same and all other factors are held constant OOO O To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Andalusian Limited (AL) can borrow funds at an interest rate of 10.20% for a period of five years. Its marginal (rounded to two decimal places) federal-plus-state tax rate is 40%. AL's after-tax cost of debt is At the present time, Andalusian Limited (AL) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,382.73 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? O 5.31% 6.11% O 4.25% O 4.78%