25. The Allegheny Valley Power Company common stock has a beta of 0.80. If the current risk-free rate is 6.5% and the expected return on the stock market as a whole is 16%, determine the cost of equity capital for the firm (using the CAPM). (Points : 3)

14.1% 7.6% 6.5% 13.0%

Question 26.26. The following financial information is available on Rawls Manufacturing Company:

Current per share market price	$48.00
Current (t = 0) per share dividend	$3.50
Expected long-term growth rate	5.0%

Rawls can issue new common stock to net the company $44 per share. Determine the cost of internal equity capital using the dividend capitalization model approach. (Compute answer to the nearest 0.1%). (Points : 3)

12.3% 13.4% 13.0% 12.7%

Question 27.27. Determine the weighted cost of capital for the Mills Company that will finance its optimal capital budget with $120 million of long-term debt (k_d = 12.5%) and $180 million in retained earnings (k_e = 16.0%). Mills' present capital structure is considered optimal. The company's marginal tax rate is 40%. (Compute answer to nearest .1%). (Points : 3)

14.3% 12.6% 14.6% 11.9%

Question 28.28. What is the cost of a preferred stock with a $100 par value that pays a $9.60 dividend per year? The security has a flotation cost of $3.37 and will be retired at its par value in 20 years. (Points : 3)

9.6% 9.9% 10.0% 10.6%