Ch. 11 1. The financial manager of a large national firm was overheard making the following statement: 'We try to use as much retained earrings as possible for capital budgeting purposes because there is no explicit cost to these funds, and this allows us to invest in relatively low yielding projects that would not be feasible if we had to use new common stock We actually use retained earnings to invest in projects with yields below the coupon rate on our bonds. Comment on the validity of this statement from your point of View 2. Suppose a firm invests in projects that are much riskier than its average investments. Do you think that the firm's WACC will be affected? Why or why not