Which of the following actions would reduce its need to issue new common stock?

1.Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. The action that would REDUCE its need to issue new common stock is: e. Reduce the percentage of debt in the target capital structure.

1. LaPango Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. The project that should be accepted is: a. Project B, which is of below-average risk and has a return of 8.5%.
2. Which of the following statements is CORRECT? d. Since the money is readily available, the after-tax cost of retained earnings is usually much lower than the after-tax cost of debt.
3. Which of the following statements is CORRECT? c. If a company assigns the same cost of capital to all of its projects regardless of each project’s risk, then the company is likely to reject some safe projects that it actually should accept and to accept some risky projects that it should reject.
4. Cranberry Corp. has two divisions of equal size: a computer manufacturing division and a data processing division. Its CFO believes that stand-alone data processor companies typically have a WACC of 8%, while stand-alone computer manufacturers typically have a 12% WACC. The statement that is correct is: b. The decision not to adjust for risk means, in effect, that it is favoring the data processing division. Therefore, that division is likely to become a larger part of the consolidated company over time.