1. Everything else being equal a lower corporate tax rate

a. will not affect the WACC of a firm with debt in its capital structure

b. will decrease the WACC of a firm with only equity in its capital structure

c. will decrease the WACC of a firm with some debt in its capital structure

d. will increase the WACC of a firm with debt and equity in its capital structure

2. RTF stock is expected to return 13 percent in a normal economy and lose 8 percent in a recession. The probability of a recession is 25 percent. What is the variance of the returns on RTF stock?

.008269

.009093

.008760

.007864

.009394