Question 1. You are a financial manager of a firm and are asked to assess the cost of capital of your firm. Pou know that - Vour firm just paid dividend $3 per share - The current stock price is $60 per share - Firm beta is 10% higher than market average - Constant growth rate is 3% - Expected market return is 9% and risk free rate is 2% - There is totally 10 million of outstanding shares of stocks, and for each dollar equity, firm issued $1.5 debt - Cost of borrowing/issuing bond is 5% - Corporate tax rate 30% Uing information from the at In the followine which formule to comoute Wacc bs correc: WACC=VERE+VDRD WACC=ERE+VRD C WACC=VERE+VDRD(1taxrate) b. WACC=ERE+DRD(1taxntt) What is the wacC for your fim using cost of equity from CAPM (Geep 4-digit after decimal point, es. 0.1234) Atter you computed the WACC for your firm you know thut the WaCC of your competilor b.5\% That means the risk level of your firm is Ghigher or lowed than your competition? We inow that wace is the welghted average cost of capita, which indicates the avenges P(A, B, C, ord L. Whec an be used for every prolest / divion within a fim WAQC=VERB+VDRD(1tan Ralo) D. WACC=ERE+DRD(1tarate) What is the WACC for your firm using cost of equity from CAPM ? (keep 4-digit after decimal point, e.g., 0.1234) After you computed the WACC for your firm, you know that the WACC of your competitor is 5%. That means the risk level of your firm is (higher or lower) than your competitor? We know that WACC is the weighted average cost of capital, which indicates the average risk level of a firm. Given the following two statements, which one is correct ?(A, B, C, or D) L. WACC can be used for every project / division within a firm. II. To make a firm being profitable, the firm must earn returns higher than WACC A Both I and II are true B. Both I and II are false C. 1 is true and II is false D. I is false and II is true