116 . The most accurate way to account for flotation costs when issuing new equity to finance a project is to:
  A)   adjust cash flows in the computation of the project NPV by the dollar amount of the flotation costs.
  B)    increase the cost of equity capital by dividing it by (1 – flotation cost).
  C)    increase the cost of equity capital by multiplying it by (1 + flotation cost).
  117 . A North American investment society held a panel discussion on the topics of capital costs and capital budgeting. Which of the following comments made during this discussion is the least accurate?
  A)   An increase in the after-tax cost of debt may occur at a break point.
  B)    Any given project’s NPV will decline when a breakpoint is reached.
  C)    A project’s internal rate of return decreases when a breakpoint is reached.
  118 .  The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in years 1 through 4, $35,000 per year in years 5 through 9, and $40,000 in year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10%. The payback period for this investment is closest to:
  A)   4.86 years.
  B)    5.23 years.
  C)    6.12 years.
  119 . A new project is expected to be less risky than the average risk of existing projects. The appropriate discount rate to use when *uating this project is:
  A)   less than the firm’s marginal cost of capital.
  B)    greater than the firm’s marginal cost of capital.
  C)    the firm’s marginal cost of capital.
  120 . A firm has $100 in equity and $300 in debt. The firm recently issued bonds at the market required rate of 9%. The firm's beta is 1.125, the risk-free rate is 6%, and the expected return in the market is 14%. Assume the firm is at their optimal capital structure and the firm's tax rate is 40%. What is the firm's weighted average cost of capital (WACC)?
  A)   7.8%.
  B)    8.6%.
  C)    5.4%.
  
    
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