Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control? Check all that apply. The general level of stock prices The effect of the tax rate on the cost of debt in the weighted average cost of capital equation The firm's capital budgeting decision rules The impact of cost of capital on managerial decisions Consider the following case: Wellington Industries has two divisions, L and H. Division L is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. cause the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Wellington Industries accept or reject the project? Accept the project O Reject the project on what grounds do you base your accept-reject decision? O Division H's project should be accepted, as its return is greater than the risk-based cost of capital for the division. O Division H's project should be rejected since its return is less than the risk-based cost of capital for the division. PBBC is considering investing in a project whose risk is greater than the firm's current risk level based on any method for assessing risk. Which of the following should management do when evaluating this project? They should always reject the project, because it will increase the firm's risk level. To take the higher risk level into account, they will need to use a discount rate that is greater than the cost of capital to evaluate the project. To take the higher risk level into account, they will need to increase the flotation expenses associated with the project. To take the higher risk level into account, they will need to change the weights on the capital components. Which of the following statements is correct? O A firm's weighted average cost of capitalshould decrease ir its tax rate increases, but the yield to maturity of Its noncallable bonds remains the same and all other factors are held constant. O The cost of raising funds from retained earnings is usually a lot cheaper than the cost of debt financing, because the firm already possesses the funds in retained earnings. O A firm's after-tax cost of preferred stock may be significantly less than its before-tax cost, because issuing preferred stock dividends creates a tax shelter