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1. All of the following statements are correct, EXCEPT: a. Capital structure refers to the firm's combination of debt and equity. b. A firm's cost of capital reflects the average riskiness of all of the securities it has issued, which may be less risky or riskier. c. CAPM is the overall return the firm must earn on its assets to maintain the value of its stock. It is a market rate that is based on the market's perception of the risk of the firm's assets. d. Cost of debt represents the interest rate on new debt can easily be estimated using the yield to maturity on outstanding debt or by knowing the bond rating and looking up rates on new issues with the same rating. 2. refer to the opportunity cost of using capital in one way as opposed to alternative financial market investments of the same systematic risk. a. Cost of capital b. required return c. appropriate discount rate d. all of the above e. only (a) and (b) 3. There are two major methods for determining the cost of equity: a. Dividend growth model/ The Security Market Line b. Dividend growth model/ The WACC c. The Pure Play Approach/ The Security Market Line d. CAPM/ The Subjective Method