1. One way to adjust for new projects that have a higher risk than all previous projects under-taken by the firm is to:
a. use more debt financing
b. use more preferred stock financing
c. use less debt financing
d. add a risk premum to the wacc
e. subtract a risk premium from the wacc
2. Walken Industries bonds sell for $890 and have a par value of $1,000. The coupon rate is 6% and the bonds have a maturity of 20 years. If the company is in a 35% marginal tax bracked what is its after tax component cost of debt?
a. 6.31%
b. 4.58%
c. 7.04%
d. 9.98%
e. 8.91%