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1. Battari Inc has a target debt/equity ratio of 0.65. Its cost of equity is 18.5% and its before tax cost of debt is 13.25%. If the tax rate is 42%, what is battaris WACC?

a) 14.24%

b) 10.61%

c) 7.68%

d) 13.55%

2. Non gratis corporation is a cookie factory. It is considering acquiring a division that makes those little plastic tips on the end of the shoe laces. The unlevered beta for the plastic industry is 0.8. The division will be financed with 40% debt and 60% equity. What will the (levered) beta of this project be if the tax rate is 40%?

a) 1.20

b) .8

c) .96

d) 1.12