Reference no: EM132762931

Problem 1: In the following two statements, 1) We generally use the coupon rate on outstanding debt to measure the cost of debt. 2) Because interest expense is tax deductible, the relevant cost of debt used to calculate a firm's WACC is the after-tax cost of debt.

Select one:

a. Both statements are true.
b. Both statements are false.
c. Only statement 1) is true.
d. Only statement 2) is true.

Problem 2: A firm has issued 150,000 20-year 6% semiannual bond. The bond is currently quoted at 110. The firm has 5 million common shares, currently traded at $12 per share. There is no preferred equity. What is the capital weight for the common equity when calculating the firm's WACC?

Select one:
a. 53.33%
b. 26.67%
c. 73.33%
d. 46.67%