Question 6 5 points Projects A and B have normal cash flows. Project A has an IRR of 14%, while Project B's IRR is 11%. The two projects have the same NPV when the cost of capital is 9%. Which of the following statements is correct? a. If the cost of capital is 7%. Project A will have the higher NPV. b. If the cost of capital is 13%, Project A will have the lower NPV. c. If the cost of capital is 12%, both projects will have positive NPVs. d If the cost of capital is 10%, both projects will have a negative NPV. e. Project A's NPV is less sensitive to changes in cost of capital than Project B's. Your response: Question 7 Bond X has an 8% annual coupon and Bond Y has a 5% annual coupon. Both 5 points bonds have a 6% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is correct about the relationship between the prices of these bonds and the passage of time? a. The prices of both bonds will remain unchanged. b. The prices of both bonds will increase by 6% per year. c. The price of Bond X will decrease over time, but the price of Bond Y will increase over time. d. The price of Bond Y will decrease over time, but the price of Bond X will increase over time. e. The prices of both bonds will increase over time, but the price of Bond X will increase by more. Your response: Question 8 5 points Which of the following statements is correct? a. A typical firm's WACC exceeds its cost of equity. b. A change in a company's target capital structure cannot affect its WACC. c. If a company's tax rate increases, then all else equal, its WACC will increase. d. A firm's cost of reinvested earnings is the rate of retum stockholders require on a firm's common stock. e. Higher flotation costs reduce investors' expected retums, and that leads to a reduction in a company's WACC. Your response