1.

Stock in Daenerys Industries has a beta of 1.6. The market risk premium is 6 percent, and T-bills are currently yielding 5.5 percent. The companys most recent dividend was $1.90 per share, and dividends are expected to grow at an annual rate of 7 percent indefinitely.

If the stock sells for $38 per share, what is your best estimate of the companys cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Cost of equity

%

2.

Mullineaux Corporation has a target capital structure of 60 percent common stock, 15 percent preferred stock, and 25 percent debt. Its cost of equity is 10 percent, the cost of preferred stock is 4 percent, and the pretax cost of debt is 6 percent. The relevant tax rate is 35 percent.

a.	What is the companys WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

WACC

%

b.	What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Aftertax cost of debt

%