1. Which one of the following is true regarding a firms r_WACC and r_A?

	A.	rWACC is irrelevant to a firms capital structure.
	B.	rA is irrelevant to a firms capital structure.
	C.	When there are no costs associated with financial distress, rWACC increases with D/V ratio.
	D.	When there are no costs associated with financial distress, rA increases with D/V ratio.

2. Under the assumption that a firm maintains a constant D/V ratio, which one of the following is true?

	A.	We should discount the firms future debt tax shields using the cost of debt.
	B.	We can only use the APV method but not the WACC method to calculate a levered firm value.
	C.	The APV method and the WACC method are equivalent when calculating a levered firm value.
	D.	None of the above.

3. When we use the APV method to calculate firm value, which one of the following is true?

1. 	A.	We can always discount the firms future debt tax shields using cost of capital for firm assets rA.
   	B.	The cost of capital for firm assets rA is always equal to (E/(E+D)*rE+(D/(E+D))*rD, even when the firm does not maintain a constant leverage ratio D/V.
   	C.	Under the assumption that the firm is maintaining a constant leverage ratio D/V, we need to discount future debt tax shields by rA.
   	D.	None of the above.