1. Steady Company's stock has a beta of 0.25. If the risk-free rate is 6.1% and the market risk premium is 7.1%, what is an estimate of Steady Company's cost of equity?

Steady's cost of equity capital is enter your response here%. (Round to one decimal place.)

2. HighGrowth Company has a stock price of $19. The firm will pay a dividend next year of $1.04, and its dividend is expected to grow at a rate of 3.6% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is

enter your response here %. (Round to one decimal place.)

3. Mackenzie Company has a price of $34 and will issue a dividend of $2.00 next year. It has a beta of 1.3, the risk-free rate is 5.3%, and the market risk premium is estimated to be

5.2%.

a. Estimate the equity cost of capital for Mackenzie.

b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)?

4. Growth Company's current share price is $20.30, and it is expected to pay a $1.25 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of3.6% per year.

a. What is an estimate of Growth Company's cost of equity?

b. Growth Company also has preferred stock outstanding that pays a

$1.85 per share fixed dividend. If this stock is currently priced at

$28.30, what is Growth Company's cost of preferred stock?

c. Growth Company has existing debt issued three years ago with a coupon rate of

5.7%. The firm just issued new debt at par with a coupon rate of

6.3%. What is Growth Company's cost of debt?

d. Growth Company has 4.8 million common shares outstanding and 1.1 million preferred shares outstanding, and its equity has a total book value of $50.1 million. Its liabilities have a market value of $20.5 million. If Growth Company's common and preferred shares are priced at

$20.30 and $28.30, respectively, what is the market value of Growth Company's assets?

e. Growth Company faces a 40% tax rate. Given the information in parts a through d and your answers to those problems, what is Growth Company's WACC?

Note: Assume that the firm will always be able to utilize its full interest tax shield.