1. The capital structure theory with corporate taxes and bankruptcy costs suggest;

A. the weighted average cost of capital continuously decreases

B. the weighted average cost of capital remains constant as the firm's financial leverage increases

C. The weighted average cost of capital continuously increases as the firms financial leverage increases

D. The weighted average cost of capital initially falls as the firm uses a moderate level of leverage and then rises as a firm uses a high level of leverage.

2. If Chester Corp. were to buy all of it's shares outstanding at its current price, how much would it cost Chester Corp, excluding brokerage fees?

1 $94 million $2 million $98 million $193 million

closed price $28.51

shares 3,454,257

book value $27.24