Answer the questions.

Cost of capital is not the same as required return for a project. $(10$points$)$

a$.$ True

b$.$ False

Cost of capital is an appropriate discount rate for the net present value. $(10$points$)$

a$.$ True

b$.$ False

You can estimate the cost of equity based on either security market line $($SML$)$ or dividend growth model. $(10$points$)$

a$.$ True

b$.$ False

A higher WACC leads to a higher acceptance of a project in capital budgeting. $(10$points$)$

a$.$ True

b$.$ False

As firms increase the leverage, the cost of equity will increase. $(10$points$)$

a$.$ True

b$.$ False

As firms decrease the leverage, the cost of asset $($WACC$)$ will remain the same or decrease, depending on tax. $(10$points$)$

a$.$ True

b$.$ False

Capital structure theory with bankruptcy costs argues that as firms increase debt, the interest tax shield and expected bankruptcy costs have an opposite effect on firm value. $(10$points$)$

a$.$ True

b$.$ False

Pecking Order theory suggests that when firms finance corporate investment, they follow a specific order:$1.$ retained earnings, $2.$ equity, and $3.$ debt. $(10$points$)$

a$.$ True

b$.$ False