1.ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1045. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABCs common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The companys average tax rate is 30%.

What is this companys after-tax cost of debt?

Group of answer choices

2.91%

3.07%

4.10%

5.38%

2.ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1045. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABCs common stock has a beta of 1.6. You estimate the risk-free rate to be 2% and the required return on the market to be 12%. The companys average tax rate is 30%.

What is the cost of the companys common stock?

Group of answer choices

21.6%

18.0%

17.4%

18.7%