1. A company has the following capital structure:

Security	Beta	Market value
Debt	0	600
Preferred stocks	0.2	200
Common stocks	1.4	800

The risk-free rate is 5% and the market risk-premium is 5%.

a. What is the firm assets beta?

(a) 0,625

(b) 0,725

(c) 0,925

(d) 0,8

b. What is the expected return on equity (cost of equity):

(a) 10,8%

(b) 9,8%

(c) 13,8%

(d) 11,8%

c. What discount rate should the company use for evaluating investment projects with similar risk (Tc=16%)?

(a) 7,325%

(b) 8,325%

(c) 9,325%

(d) 10,8%