1. Problem has a weighted average cost of capital of 9.5 percent. The company’s cost of equity is 11 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 40 percent. What is the company's debt-equity ratio?

2. One danger of using a binder for initial negotiations, rather than a purchase contract, is

a. the binder is not as specific as a purchase contract.

b. negotiations may break down due to a point not contained in the binder.

c. the real estate salesperson can demand a larger commission if a binder is required.

d. both a and b.