Final Exam Winter 2023 rt I - Multiple Choice - Please CIRCLE your answers (2.5 points each) which of the following statements is correct for a company with both debt and equity in its capital structure? a. WACC calculations should be based on the before-tax costs of all the individual capital components. b. Flotation costs associated with issuing new common stock normally reduce the WACC. c. If a company's tax rate increases, then, all else equal, its after-tax cost of debt will decline. d. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing. e. A change in the percent of debt in a company's capital structure will not affect its WACC. he balance sheet for the Morales Company shows total common equity of $3, 125,000. The company has 000 shares of stock outstanding, and they sell at $72.50 per share. By how much do the firm's market and k values per share differ? a. $58.50 b. $72.50 $55.00 1. $47.50 $33.43 CFO of Reverb Industries plans to calculate a new project's NPV by estimating the relevant cash flows ch year of the project's life (i.e., the initial investment cost, the annual operating cash flows, and the al cash flow), then discounting those cash flows at the company's overall WACC. Which one of the ving factors should the CFO be sure to include when estimating the relevant cash flows? All sunk costs that have been incurred relating to the project. All interest expenses on debt used to help finance the project. The investment in working capital required to operate the project, even if that investment will be recovered at the end of the project's life. Sunk costs that have been incurred relating to the project, but only if those costs were incurred prior o the current year. Effects of the project on other divisions of the firm, but only if those effects lower the project's own lirect cash flows. rg Corporation follows a strict residual dividend policy. All else equal, which of the following factors most likely to lead to an increase in the firm's dividend per share? company increases the percentage of equity in its target capital structure. number of profitable potential projects increases. gress lowers the tax rate on capital gains. The remainder of the tax code is not changed. ngs are unchanged, but the firm issues new shares of common stock. irm's net income increases. Page 1