A firm has a debt-to-equity ratio of 2:1.

The firms debt beta is 0.7.

Five-year government bonds yield 6% pa with a coupon rate of 5% 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 is $10.

The corporate tax rate is 30%. Assume a classical tax system.

Which statement is NOT correct?

a.

The expected return on equity is 11% pa.

b.

The expected return on debt is 8.8% pa.

c.

The beta of the firm's equity is 1.65.

d.

The beta of the firms assets is 0.883.

e.

The firms after-tax WACC is 7.77% pa.