Company Paypay Inc. has no retained earnings since it has always paid out all of its earnings as dividends. This same situation is expected to persist in the future. The company uses the CAPM to calculate its required cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would REDUCE its WACC, if all else equal? 1) The expected rate of return on the market decreases. 11) The market risk premium increases. Only 1) Only II) Both I) and II) Neither 1) nor II)