All of the following capital budgeting tools are suitable for non normal cash flows except MIRR Probability index IRR NPV Which of the following statement is correct? The weighted average cost of capital is calculated on a before tax basis. An increase in the market risk premium is likely to increase the weighted average cost of capital. The weights of debt and equity should be based on from the balance sheet because this is the most accurate assessment of the valuation. All of these statements are correct. You firm needs a computerized machine tool lathe which costs $80,000, will generate $50,000 in cost savings, and requires $12,000 in net working capital for the project's life of 5 years. After 5 years, machine will be replaced. The machine falls into the MACRS-3 year class life category. Assume a tax rate of 30% and a discount rate of 12%. What is the initial investment (cash flow) for this project? $12,000 $64,000 $80,000 $92,000 ADK has a 15-year, 9% annual coupon bonds outstanding. If the bonds currently sell for 111% of $1,000 par value, and the firm pays an average tax rate of 36%, what will be the before tax and component cost of debt? 7.74%; 4.95% 7.91%; 5.06% 8.05%; 5.15% 9%; 5.76%