2. WACC A company is 40% financed by risk -free debt . The interest rate is 10 %, the expected market risk premium is 8% , and the beta of the company's common stock is .5. What is the company cost of capital ? What is the after-tax WACC, assuming that the company pays tax at a 35% rate? 3. Measuring risk Refer to the top - right panel of Figure 9.2 . What proportion of Dow Chemical's returns was explained by market movements ? What proportion of risk was diversifiable ? How does the diversifiable risk show up in the plot ? What is the range of possible errors in the estimated beta