Factors that affect the cost of capital equation

Each of the following factors affects the weighted average cost of capital $($WACC$)$ equation. Which are factors that a firm can control? Check all that apply.

The firn's capital budgeting decision rules

The general level of stock prices

The firm's capital structure

The firm's dividend payout ratio

The impact of a firm's cost of capital on managerial decisions

Consider the following case:

National Petroleum Refiners Corporation $($NPR$)$ has two divisions, L and H$.$ Division L is the company's low$-$risk division and would have a weighted average cost of capital of $8\%$ if it was operated as an independent company, Division $H$ is the company's high$-$risk division and would have a weighted average cost of capital of $14\%$ if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cast of capital of $11\%.$ Division $L$ is considering a project with an expected retum of $9\mathrm{.}5\%.$

Should National Petroleum Refiners Corporation $($NPR$)$ accept or reject the project?

Reject the project

Accept the project

On what grounds do you base your accept$-$reject decision?

Division L$\text{'}$s project should be accepted, since its return is greater than the risk$-$based cost of capital for the division.

Division L$\text{'}$s project, should be accepted, because its return is less than the risk$-$based cost of capital for the division.