1. A firm has a $700 million market capitalization and $150 million in debt. It also has $70 million in cash and short-term investments on the balance sheet. Its CAPM beta is 1.6, the yield to maturity on its debt is 5%, the corporate tax rate is 35%, and the required return on its equity is 11%. What is this firm’s WACC?
2. If a firm that operates in a single business has positive net leverage in its capital structure, the required return on its equity will be higher than the appropriate discount rate for the firm's typical projects.