1. Indicate whether each of the following actions would increase or decrease a firm's WACC.
a. The corporate tax rate for the firm is decreased. _________________________________
b. The Federal Reserve raises interest rates. _________________________________
c. The firm uses more debt and less equity in its capital structure to expand operations. _____________________
2. Rank order the following capital project types according to level of risk, from lowest risk to highest risk.
Expansion
New Venture
Replacement
3. Why is freeing up cash like this important to any given company?