1. A firm's weighted average cost of capital is determined using all of the following inputs EXCEPT
A) the probability distribution of expected returns. B) the amount of capital necessary to make the investment. C) the firm's capital structure D) the firm's utter tax cost of debt.
2. QRM, Inc.'s marginal tax rate is 35%. It can issue 10-year bonds with an annual coupon rate of 7% and a par value of $1,000. After $12 per bond flotation costs, new bonds will net the company exist966 in proceeds. Determine the appropriate after-tax cost of new debt for the firm to use in a capital budgeting analysis.
A) 7.50% B) 7.68% C) 4.87% D) 4.99%