8,10,12,13

7. Dewyco has preferred stock trading at $50 per share. The next preferred dividend of $4 is due in one year. What is Dewyco's cost of capital for preferred stock? 8. Steady Company's stock has a beta of 0.20. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate of Steady Company's cost of equity? 9. Wild Swings Inc.'s stock has a beta of 2.5. Given the information in Problem 8, what is an estimate of Wild Swings' cost of equity? 10. High Growth Company has a stock price of $20. The firm will pay a dividend next year of $1, and its dividend is expected to grow at a rate of 4% per year thereafter. What is your estimate of High Growth's cost of equity capital? 11. Slow 'n Steady, Inc., has a stock price of $30, will pay a dividend next year of $3, and has expected dividend growth of 1% per year. What is your estimate of Slow 'n Steady's cost of equity capital? 12. Mackenzie Company has a price of $36 and will issue a dividend of $2 next year. It has a beta of 1.2, the risk-free rate is 5.5%, and it estimates the market risk premium to be 5%. 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 (a)? A Second Look at the Weighted Average Cost of Capital 13. CoffeeCarts has a cost of equity of 15%, has an effective cost of debt of 4%, and is financed 70% with equity and 30% with debt. What is this firm's WACC? 14. AllCity, Inc., is financed 40% with debt, 10% with preferred stock, and 50% with com- mon stock. Its pretax cost of debt is 6%, its preferred stock pays an annual dividend of $2.50 and is priced at $30. It has an equity beta of 1.1. Assume the risk free rate is