1. The capital structure weights used in computing a company's weighted average cost of capital:

   1. depend on the financing obtained to fund each specific project.

   2. remain constant over time unless new securities are issued or outstanding securities are redeemed.

   3. can only include debt and common stock.

   4. are based on the market values of the outstanding securities.

   5. are based on the book values of debt and equity.

2. Question 6

   If a company uses its WACC as the discount rate for all of the projects it undertakes then the company will tend to:

   1. accept all positive net present value projects.

   2. reject all high-risk projects.

   3. increase the average risk level of the company over time.

   4. reject all negative net present value projects.

   5. favor low-risk projects over high-risk projects.

3. Question 7

   The slope of the regression line on a graph of common stock returns on the y-axis and market returns on the x-axis represents:

   1. alpha

   2. beta

   3. R-squared

   4. standard error

   5. standard deviation