1. All of the following will make the break-even point increase, other things equal, EXCEPT

Select one:

a. the sales price per unit is decreased due to competition.

b. fixed costs increase.

c. variable costs increase due to higher direct labor cost.

d. the number of units sold for the year decreased.

2. Assuming no corporate taxes, the independence hypothesis suggests that a firm's weighted average cost of capital will

Select one:

a. remain constant because the cost of equity will be increasing as the amount of debt increases due to the increased risk.

b. remain constant regardless of capital structure because the cost of debt and the cost of equity are the same.

c. increase proportionally with the increase in the amount of debt a firm uses.

d. decrease proportionally with the increase in the amount of debt a firm uses.