1. Which of the following statements is most correct?

a. Since stockholders do not generally pay corporate taxes, corporations should focus on before-tax cash flows when calculating the weighted average cost of capital (WACC).

b. When calculating the weighted average cost of capital, firms should include the cost of accounts payable.

c. When calculating the weighted average cost of capital, firms should rely on historical costs rather than marginal costs of capital.

d. Answers a and b are correct

e. None of the answers above is correct

2. The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20. What is the value of a put option, assuming the same strike price and expiration date as for the call option? Question 6 options:

a. $7.33

b. $8.12

c. $8.55

d. $9.00