Question 1 Which of the following is not a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? Long-term debt. O Retained earnings. O Common stock. Accounts receivable. O None of the above. Question 2 Which of the following statements is correct? O Cost of new common stock is based on the cost of retained earnings but decreased for flotation costs necessary to issue retained earnings. 10 pts O Cost of preferred stock is the rate of return investors require on the firm's preferred stock and is calculated as the common stock dividend divided by the current price. 10 pts Because of tax effects, an increase in the risk-free rate will have a greater effect on the after-tax cost of debt than on the cost of common stock as measured by the Capital Asset Pricing Model (CAPM). When calculating the cost of debt, a company needs to adjust for taxes because interest payments are deductible by the paying corporation. None of the above statements are correct