A companys zero coupon bond issue matures in 16 years and has a yield to maturity of 10.60%. Each zero has a face value of $1,000 and there are 4,000 of the bonds outstanding. If the market values the equity at $1,800,000, what capital structure weight for debt would you use in calculating the WACC, assuming the firms only debt consists of the zeros?

0.106

0.307

0.690

0.693

none of the above

Given the following information, what is your best estimate for the firms cost of equity on January 2, 2003, if the stock sells for $42 on that day?

Date 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02

Dividend $1.50 $1.73 $2.01 $2.34 $2.71 3.17

15.92%

23.40%

24.59%

Cannot be estimated because of lack of information

None of the above