1. We have used analysts' estimate to determine that the market believes our dividends will grow at 4% per year and the next dividend will be $5. Our stock is currently selling for $40. beta=1.1.

Using DGM, what is our cost of equity (%)? [round-off to 1 decimal place]

Group of answer choices

16.5

21.5

24.0

14.0

19.0

11.5

2. Consider the following equity and debt information:

Equity information

Total equity value = 400 million

beta = 1.3

market risk premium = 8%

risk-free rate = 5%

Debt information

Total bond value = $100 million

current bond price = 1100

coupon rate = 8% (semiannual coupons)

15 years to maturity

tax rate = 20%

The cost of equity is _______%. Round-off to one decimal place. E.g., if 24.67%, input 24.7, NOT 0.2.

3. The after-tax cost of debt is ________%.

Group of answer choices

10.17

7.03

6.87

5.53

8.67

9.46