1. A companys perpetual preferred stock currently sells for $105 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock? A. 8.22% B. 9.28% C. 6.90% D. 8.02% E. 7.97%

2. Adam Inc. has the following data: rRF = 4.00%; RPM = 6.00%; and b = 0.80. What is the firm's cost of equity from retained earnings based on the CAPM? Hint: RP= (Rm-Rrf) A. 6.90% B. 8.80% C. 10.58% D. 11.41% E. 9.20%