1. Heritage Company has a beta of 1.6. Flotation costs for a new stock issue would amount to 3% ofmarketpnce. The required rate of return on the overall market is 12.6% and the rate of what is Heritage's cost of internal equity? return on Treasury bonds is 7.2%, a) 18.84% d) 15.84% e) 20.1 6% b) 8.64% c) 16.92% 2. International Corporation's preferred stock pays a 12% annual dividend on a $50 par value. The preferred shares sell for $70 each and flotation costs amount to 5% of market price. International has a marginal tax rate of 35%, what is the firm's cost of preferred stock? a) 9.0% b) 8.6% c) 5.9% d) 12.6% e) 12.0%