1) Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.00%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)

Select the correct answer.

a. 8.93%

b. 8.73%

c. 8.78%

d. 8.83%

e. 8.88%

2) Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 25%, what is the component cost of debt for use in the WACC calculation?

a. 6.03%

b. 5.44%

c. 6.35%

d. 6.67%

e. 5.73%

3) Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 25%. The firm will not be issuing any new common stock. What is Avery's WACC?

a. 9.55%

b. 8.49%

c. 9.94%

d. 9.19%

e. 8.83%