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1. Southern Home Cookin' just paid its annual dividend of $0.42 a share. The stock has a market price of $20 and a beta of
1. Southern Home Cookin' just paid its annual dividend of $0.42 a share. The stock has a market price of $20 and a beta of 0.8. The return on the U.S. Treasury bill is 3 percent and the market return is 14 percent. What is the cost of equity? A. 8.8 percent B. 11.2 percent C. 11.8 percent D. 14.2 percent E. None of the above 1 2. The capital structure weights used in computing the weighted average cost of capital: A. remain constant over time unless the firm issues new securities. B. are based on the book values of total debt and total equity. C. are based on the market values of total debt and total equity. D. are restricted to the firm's debt and common stock only 3. The cost of preferred stock is computed the same as the: A. pre-tax cost of debt. B. return on a perpetuity. C. return on an annuity. D. aftertax cost of debt
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