Attempts: Keep the Highest: /3 7. Factors that affect the cost of capital equation Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm's control? Check all that apply. Tax rate The ination rate The firm's dividend payout ratio The impact of cost of capital on managerial decisions Consider the following can ory Acme Manufacturing Corporation has two divisions, Land H. Division is the company's low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division is the company's high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same the company has a composite weighted average cost of capital of 11%. Division His considering a project with an expected return of 12% Should Acme Manufacturing Corporation accept or reject the project? O Reject the project Accept the project on what grounds do you base your accept-roject decision? Division H's project should be rejected since its return is less than the risk-based cost of capital for the division Division H's project should be accepted, as its return is greater than the risk-based cost of capital for the division