1. A decrease in a firm's financial leverage will:
A. Increase the operating risk of the firm.
B. Decrease the value of the firm in a non-MM world.
C. Decrease the WACC.
D. Reduce the variability in earnings per share.
2. What is the after-tax cost of debt for a firm in the 30% tax bracket that pays 12% on its debt?
A. 5.25%
B. 8.40%
C. 9.75%
D. 12.17%
E. 20.25%