True/False Questions. "T" for True and "F" for False 4 points each) 1) The cost of capital is the rate that must be cared on an investment project if the project is to increase the value of the common shareholders' investment 2) The cost of debt has tax benefit due to deductibility of interest. 3) A corporation's cost of common equity may be estimated using either a dividend valuation model or the capital asset pricing model. 4) Corporations distribute cash back to their owners (stockholders) either as cash dividends or by repurchasing shares of stock in the open market. 5) Dividend policy itself doesn't affect the share price (value) of the company -nute each b. what 16. (10 points) Peak Inc. currently has no debt (all equity). If the company wants, it can borrow at 6.1 percent. The firm's WACC is currently 9.4 percent, and the tax rate is 21 percent. a. What is the company's current cost of equity? (4 pts) b. If the firm choose to have a capital structure of 25 percent debt and 75 percent equity what will be the company's cost of equity in this case? Hint: M&M Proposition II with taxes (6 pts) ***IMPORTANT: WRITE ALL ANSWERS ON ANSWER SHEET***