1)Per the Finance Supplement Lecture, the long-term average annual return (using a CAGR [compound annual growth rate]) for the U.S. stock market for the past 70+ years is about ___________________ pre-tax

Group of answer choices

a)12%

b)7%

c)9%

d)6%

2)

The Ken Cory Copy Machine Company has a cost of debt of 7% and a cost of equity of 16%. The capital structure is comprised of 60% debt and 40% common equity. The Cory Copying Company has a new investment opportunity which is expected to have a 20-year IRR of 13.6%. The hurdle rate for this investment opportunity is 13%.

Solve for the WACC, then answer the following two questions. What is the numerical difference between the IRR and the WACC, and should the company approve the investment or not?

Group of answer choices

a)5%, Yes

b)0.6%, No

c)3%, Yes

d)6.4%, No