2)Laurel, Inc., has debt outstanding with a coupon rate of 6.2% and a yield to maturity of 6.9%. Its tax rate is 40%. What is Laurel's effective (after-tax) cost of debt? NOTE: Assume that the debt has annual coupons.

3) Dewyco has preferred stock trading a $49 per share. The next preferred dividend of $4 is due in one year. What is Dewyco's cost of capital for preferred stock?

4) Steady Company's stock has a beta of 0.17. If the risk-free rate is 6.1% and the market risk premium is 6.8%,

what is an estimate of Steady Company's cost of equity?

5) HighGrowth Company has a stock price of $20.The firm will pay a dividend next year of $1.17,and its dividend is expected to grow at a rate of 3.7% per year thereafter. What is your estimate of HighGrowth's cost of equity capital?

6) Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.5, the risk-free rate is 5.7%, and the market risk premium is estimated to be 4.9%.

a. Estimate the equity cost of capital for Mackenzie.

b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part

7) AllCity, Inc., is financed 43% with debt, 10% with preferred stock, and 47% with common stock. Its cost of debt is 5.7%, its preferred stock pays an annual dividend of $2.47 and is priced at $29. It has an equity beta of 1.12. Assume the risk-free rate is 1.7%, the market risk premium is 6.5% andAllCity's tax rate is 35%. What is its after-tax WACC?

8) Pfd Company has debt with a yield to maturity of 7.0%, a cost of equity of 13.0%, and a cost of preferred stock of 9.0%. The market values of its debt, preferred stock, and equity are $10.0 million, $ 3.0 million, and $ 15.0 million, respectively, and its tax rate is40%.What is this firm's WACC?

9) RiverRocks, whose WACC is 12.7%, is considering an acquisition of Raft Adventures (whose WACC is 15.4%). What is the appropriate discount rate for RiverRocks to use to evaluate the acquisition? Why?