1. You buy a car for $18,450. You must also pay tax and license fees of $725. You have $1,500 as a down payment. Your bank will make you a 4-year car loan for the remaining amount, at 7.2% interest, but will charge you a $75 processing fee (which will be added to your loan amount).
a) What are your monthly payments?
b) What is your finance charge?
c) What is the total cost of the car, including finance charges?
d) What is the APR?
2. Which of the following statements is CORRECT?
The WACC exceeds the cost of equity.
The WACC is calculated using before-tax costs for all components.
A change in a company's target capital structure cannot affect its WACC.
None of these.
An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.