The cost of capital is affected by many factors

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1. GenCorp. uses only equity capital, has two divisions of equal size, and has no debt or preferred shares. The corporate (composite) WACC is 12.0%, Division One's cost of capital is 10.0%, and Division Two's cost is 14.0%. Which of the following projects shoule GenCorp. select?

a) Division Two project with an 11% return.

b) Division Two project with a 12% return.

c) Division One project with an 11% return.

d) Division One project with a 9% return.

e) Division Two project with a 13% return.

2. The cost of capital is affected by many factors. Which of the following factors can a firm control?

a) Interest cost

b) Credit crises

c) Market risk premium

d) Tax rates

e) Dividend policy

Reference no: EM133272704

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