A firm has a debt-to-equity ratio of 1:1.

The firms debt beta is 0.2.

Five-year government bonds yield 5% pa with a coupon rate of 8% pa.

The market's expected dividend return is 3% pa and its expected capital return is 7% pa.

The firm stocks next dividend is expected to be $1, paid one year from now.

Dividends are expected to be paid annually and grow by 1% pa forever. The current stock price $10. The corporate tax rate is 30%. Assume a classical tax system.

Which statement is NOT correct?

a. The expected return on debt is 8.4% pa.

b. The expected return on equity is 11% pa.

c. The beta of the firms assets is 0.7.

d. The firms after-tax WACC is 7.6% pa.

e. The beta of the firm's equity is 1.2.