Assume the M&M world with perfect capital markets. Your firm is levered with 40% debt and 60% equity. The firm’s cost of debt is 5% regardless of leverage. Under the current capital structure, the firm’s cost of equity is 15%.1. What is the firm’s current cost of capital (i. e. pre-tax WACC)?A. 18%B. 20%C. 15%D. 11%2. What would be the firm’s cost of capital if the firm were unlevered?A. 18%B. 15%C. 11%D. 20%

Which of the following makes a true statement about the relationship between government and financial institutions? government and financial institutions do not interact with each other. financial institutions like the u.s. treasury must approve increases in the government deficit. government can pass laws to limit what financial institutions can charge in interest and fees. financial institutions like local banks must approve interest rates set by the federal reserve.