1. A company has the following capital structure:

Security	Expected return	Market value
Debt	5	1000
Preferred stocks	6	300
Common stocks	13	1200

1. What is the expected return on equity (cost of equity):

(a) 11.6%

(b) 10.6%

(c) 12.6%

(d) 9.6%

(e)

B. What discount rate should the company use for evaluating investment projects with similar risk (Tc=16%)?