30) UPS, a delivery services company, has a beta of 1.4, and Wal-Mart has a beta of 0.9. The risk-free rate of interest is 4% and the market risk premiun is 6%, what is the expected return on a portfolio with 50% of its money in UPS and the balance in Wal-Mart? A) 10.9% B) 10.4% C) 12.0% D) 13.1% 31) Assume Lavender Corporation has a market value of $4 billion of equity and a market value of S19.8 billion of debt. What are the weights in equity and debt that are used for calculating the WACC? A) 0.10, 0.90 B) 0.832, 0.168 C) 0.168, 0.832 D) 0.90, 0.10 32) Outstanding debt of Home Depot trades with a yield tomaturity of 8%. The tax rate of Home Depot is 30%, what is the effective cost of debt of Home Depot? A) 5.88% B)896 C) 6.44% D) 5.60% 33) Assume preferred stock of Ford Motors pays a dividend of $3.50 each year and trades at a price of $30. What is the cost of preferred stock capital for Ford? A) 10.5% B) 11.7% C) 11.1% D) 10.7% 34) IBM expects to pay a dividend of $5 next year and expects these dividends to grow at 7% a year. The price of IBM is $90 per share. What is IBM's cost of equity capital? A) 3.77% B) 5.02% C)7% D) 12.56% 35) Your estimate of the market risk premium is 6%. The risk-free rate of return is 4% and General Motors has a beta of 1.4. What is General Motors' cost of equity capital? A) 11.2% B) 12.4% c) 11.8% D) 13.0%