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Which of the following are ways that a firm can reduce cash flows in order to prevent managers from wastefuly spending excess cash fows? Check all that apply. Funneling excess cash flows back to sharehoiders through higher dividends Minimizing the amount of debt in the firm's capital structure so that the firm can borrow money at a reasonable rate when good investment opportunities arise Funneling excess cash flows back to shareholders through stock repurchases more disciplined Increasing the amount of debt in the firm's target capital a structure in the hope that higher debt-service requirements will force maragers to be Blue Ram Brewing Company currently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity The firm's unlevered beta is 1.2, and its cost of equity is 14.20%. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC also equals 14.20%. The risk-free rate of interest (re) is 4%, and the market risk premium (RP) is 8.5%. Blue Ram's marginal tax rate is 35%. Blue Ram is examining how different levels of debt will affect its costs of debt and equity, as well as its WACC. The firm has collected the financial information that follows to analyze its weighted average cost of capital (WACC). Complete the following table. Before-Tax Bond Cost of Debt Levered Cost of D/A E/A Ratio Ratio D/E Ratio Rating (rd) Beta (b) Equity (rs) WACC 14.20% 1.2 14.20% 0.0 1.0 0.2 0.8 0.4 0.6 0.6 0.4 0.8 0.2 0.00 0.25 0.67 1.50 13.66% 15.90% 7 .2% 7.7% 8.9% 11,9%, 18.62% 1.72 2.37 432 13.13% 3. | 40.7296 . 0sSick-m 1556403040407 0AAA68970168BDE

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