Question 1 In a perfect capital market, the weighted average cost of capital is defined as: r=ref trop In this setting Are only differs from rg because of transaction costs associated with issuing equity. OB. Ta depends upon the firm's marginal tax rate. c.re is always equal to rd D.re is always greater than rd: Suppose Australian Express Inc. has no debt and an equity cost of capital of 11.2%. The average debt-to-value ratio for the credit services industry (the industry that Australian Express Inc. is operating in) is 35%. What would its cost of equity be if it took on the average amount of debt for its industry at a cost of debt of 24, assume that Australian Express Inc. is operating in perfect capital markets? A 14.42% OB 15.624 C. 16:35 0.9.68 Pitmann Ltd and Markov Ltd have identical expected operating cash flows of $600 million in perpetuity, but Pitmann is financed entirely by equity, while Markovs capital structure includes 30 percent debt and 70 percent equity finance. Assume a perfect capital market and risk free debt, the measured equity beta for Pitmann is 0.8, the yield on ten-year Government bonds is 6 percent and the market risk premium is 7 percent. Each firm has 500 million shares on issue. What is the theoretical firm value for Markov Ltd, rounded to the nearest $100 million? A. 55,500 million B. 55,300 million C. 55.200 million OD 55,400 million Question 4 1 points Save Answer A firm operates in perfect capital markets. The required return on its outstanding debt is 6 percent, the required return on its shares is 14 percent, and its WACC is 10 percent. What is the firm's debt-to-equity ratio, rounded to 1 decimal place? O A 1.2 B. 1.0 OC 06 0.0.8