Question 2 20 pts SmithTowne has a capital structure of 75% equity and 25% debt in market value terms. In a perfect capital market (no taxes, no bankruptcy costs, no financing frictions), if SmithTowne utilizes operating cash flows to pay down its bank loans that are outstanding, what will be the most likely impact to the cost of equity capital (re? re does not change re decreases re increases Xpat Tech is biotech company. Due COVID-19 increases in volume, profits and stock price have been soaring. However, it was just announced that one of the Xpat's promising pharmaceuticals failed a late-stage drug trial. What type of risk is the possibility of a failed drug trial and according to CAPM should investors care about this risk? Systematic risk: Yes, investors care about this risk Systematic risk: No, investors do not care about this risk Firm-specific risk: Yes, investors care about this risk Firm-specific risk: No, investors do not care about this risk Yachting Daily has a project that is estimated to produce operating cash flow (OCF) of $55,000 for each of the next five years. If the company estimates that accounts receivable will increase each year for years 1-4 before dropping to zero in year 5, how will the net cash flow (NCF) compare to OCF in year 5 of the project? NCF - OCH O NCF > OCF NCF