1. When determining relevant cash flows for project evaluation, we should _____.

• ignore interest and other financing expenses
• subtract interest expenses from EBIT
• discount interest expenses to the present
• add back in interest expenses after subracting taxes

2. Sunk costs are costs that _____.

• have been incurred in the past and cannot be recouped fully
• are due to a sunken ship
• will occur in the future
• may change based on the NPV of the project

3. Daytona Racing Inc. has a capital structure of 38% debt and 62% common stock. The expected return on the firm's debt is 5% and the expected return on the firm's equity is 12%. Assume perfect capital markets, What is the company's WACC?