My answers were wrong and they were as follows:

32 The corporate cost of capital is used as the hurdle (discount) rate for all projects being evaluated in the organization, 33 The cost of debt is the interest rate set on debt financing, while the cost of equity is defined similarly; it is the rate of return required by equity investors, 37 9.6 percent.

Question 32. Question : Which of the following statements about cost of capital estimation is most correct? Student Answer: Because there is no tax savings associated with debt issued by not-for-profit organizations, it is theoretically wrong to recognize the savings for investor-owned businesses. The corporate cost of capital is either the cost of equity or the cost of debt, whichever is greater. In general, at least five methods are used to estimate the cost of debt. The corporate cost of capital is used as the hurdle (discount) rate for all projects being evaluated in the organization. None of the above statements is correct.

Question 33. Question : Which of the following statements regarding the cost of equity is(are) most correct? Student Answer: The cost of equity for a not-for-profit hospital is zero. The debt cost plus risk premium method is one way to estimate the cost of equity. Answers (a), (b), and (c) are correct. Answers (a) and (b) are correct. The cost of debt is the interest rate set on debt financing, while the cost of equity is defined similarly; it is the rate of return required by equity investors.

Question 37. Question : Assume a for-profit skilled nursing facility chain has a target capital structure that is 40 percent debt and 60 percent equity. Assume the chain plans to finance a new project with 50 percent debt and 50 percent equity. The marginal before-tax cost of debt is 8 percent, the tax rate is 35 percent, and the marginal cost of equity is estimated to be 14 percent. What is the organization's corporate cost of capital (rounded to the nearest tenth of a percent)? Student Answer: 10.5 percent 22.0 percent 9.6 percent 11.6 percent 11.0 percent