6. Assume that you are a consultant to Medco Inc., and you have been provided with the following data: D1 = $0.67; PO = $27.50; and g = 8.00% (constant). What is the cost of equity based on the DCF approach? 9.42% 9.91% 10.44% 10.96% 7. Sam Company is expected to pay a $2.50 dividend at year end. The dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The after- tax cost of debt is 4.5%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company's WACC? 5.25% 6.85% 7.07% 7.67%