Furness Corporation has the following balance sheet data: Debt market value 100 million, coupon 8%, current market yield 5% Preferred stock market value 40 million, share par value 50, current market price 60, and dividend yield 6% Common stock market value 240 million, stock beta 1.45, expected market risk premium 8%, and 10-year government bond 2%. Furness corporation tax rate 30% Based on Furness Corporation data, answer the questions 16-18 below. 16. What is the cost of preferred stock? a) 7.00% b) 4.90% c) 3.50% d) 5.00% e) None of the above

17. What is the cost of debt? a) 6.00% b) 5.00% c) 4.20% d) 3.50% e) None of the above

18. What is the Cost of capital (WACC) for Furness Corporation? (round up to 2 decimal points): a) 8.02% b) 18.50% c) 11.87% d) 26.50% e) None of the above

19. When evaluating a new project, the firm should consider all of the following factors except: a) Changes in working capital attributable to the project. b) The resulting difference in depreciation expense if the project involves replacement. c) Previous expenditures associated with a market test to determine the feasibility of the project, if the expenditures have been expensed for tax purposes. d) The current market value of any equipment to be replaced. e) All of the above should be considered.

20. The firm's weighted average cost of capital (WACC) is: a) Set by the board of directors of the firm because it is the benchmark they use to evaluate upper management. b) Regulated by the authorities because tax-deductible debt is included in the computation. c) The same as the firm's internal rate of return (IRR). d) Determined by the financial markets because investors provide the funds used by firms and these funds have costs, which are the returns demanded by investors. e) The total net present value (NPV) of all the capital budgeting projects in which the firm invests in any year.