5. A. Butcher Timber Company hired your consulting firm to help them estimate the cost of equity. The yield on the firm's bonds is 8.753, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 5.00$ over a firm's own cost of debt. What is an estimate of the firm's cost of equity from retained earnings? a. 11.601 b. 12.758 C. 13.858 d. 14.170 e. 15.601 6. You were hired as a consultant to Gambang Company, whose target capital structure is 405 debt, 30% preferred, and 30% common equity. The after-tax cost of debt is 5.009, the cost of preferred is 7.501, and the cost of retained earnings is 12.751. The firm will not be issuing any new stock. What is its WACC? a. 8.089 b. 8.485 C. 9.249 d. 9.839 e. 10.12 1 Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (Di - $2.50), the dividend is expected to grow at a constant rate of 5 a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 405 debt and 60% common equity. What is the company's WACC if all the equity used is from retained earnings? a. 7.074 b. 7.26 c. 7.40 d. 7.703 R