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Keep the Highest: /6 Attempts: Aa Aa 7. Factors that affect the WACC equation Each of the following factors affects the weighted average cost of capital (WACC) equation. Which are factors that firm cannot control? Check all that apply. The general level of stock prices The firm's capital budgeting decision rules The firm's dividend payout ratio Tax rates The impact of cost of capital on managerial decisions Consider the following case: Anderson Animations Corporation (AAC) has two divisions,, L and H. Division L is the company's low-risk division and would have a welghted average cost of capital of 8% if it was operated as an independent company. Division H 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 size, the company has a composite weighted average cost of capital of 11% Division H is considering a project with an expected return of 12 % . Should Anderson Animations Corporation (AAC) accept or reject the project? O Reject the project OAccept the project On what grounds do you base your accept-reject decision? ODivision Hs project should be rejected since its return is less than the risk-based cost of capital for the division O Division H's project should be accepted, as its return is greater than the risk-based cost of capital for the division

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