Question 10 (2.5 points) Consider the following scenario (the given information is the same as in the previous question): Suppose a company has 100 million common shares outstanding, and each share sells for $20. We have estimated that the shares have a beta of 1.2, the risk- free rate is 3%, and the expected market return is 8%. The marginal tax rate for this company is 21%. The company also has $2 billion of bonds outstanding and the yield to maturity on these bonds is 5%. The company has a target capital structure of 60% equity and 40% debt. It does not and will not issue preferred stocks in the future. Suppose the company has the flotation costs of 8% for equity and 4% for debt, the company needs to issue in new securities in order to finance a $ 70 million project. OA) $76.15 million B) $72.92 million C) $74.15 million OD) $74.79 million Question 11 (2.5 points) If a company is considering whether to accept Project A, which is as risky as the average project within the company, the appropriate discount rate for Project A should be the company's WACC. A) Lower than B) Equal to C) Sometimes higher than but sometimes lower than OD) Higher than Question 12 (2.5 points) Dove company has an overall WACC of 8%. Its assets vary widely in risk, and the company evaluates low-risk projects at the cost of 6%, average projects at 8%, and high-risk projects at 10%. The company is considering the following projects: Project A: High-risk with an expected return of 8% Project B: High-risk with an expected return of 12% Project C: Average-risk with an expected return of 7% Project D: Low-risk with an expected return of 4% Project E: Low-risk with an expected return of 8% Which set of the projects should the company accept? OA) B and E only B) A and E only C) A, C, and D only D) B, C, and D only