3. Weir Inc. has a target capital structure of 35% debt, 20% preferred, and 45% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 9.0%, and the tax rate is 40%. The weighted average cost of capital should be:

		4.52%
		6.62%
		7.53%
		8.15%
		9.54%

Stocks A has an expected growth of 8%, a price of $30, and the expected return for the stock is 11%. Stock B has an expected growth of 10%, a price of $40, and the expected return for the stock is 13%. If the dividend discount model holds:

		The two stocks should have the same expected dividend
		As expected dividend is $0.90
		A's expected dividend is $1.20
		B's expected dividend is $0.75
		B's expected dividend is $0. 90