1. Stock A's stock has a beta of 1.30, and its required return is 13.75%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint:First find the market risk premium.)

a. 10.15% b. 10.22% c. 10.29% d. 10.36% e. 10.43%

2. Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 8.75%, 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.)

a. 7.92% b. 7.56% c. 7.65% d. 7.74% e. 7.83%

3. 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. 5.73% b. 6.03% c. 6.35% d. 6.67% e. 5.44%

4. 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. 9.19% c. 8.49% d. 8.83% e. 9.94%