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

The firms debt beta is 0.6.

Five-year government bonds yield 5% pa with a coupon rate of 3% pa. The market's expected dividend return is 2% pa and its expected capital return is 8% pa.

The firm stocks next dividend is expected to be $2, paid one year from now. Dividends are expected to be paid annually and grow by 3% 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 beta of the firms assets is 2.1.

b.

The beta of the firm's equity is 3.6.

c.

The firms after-tax WACC is 11.4% pa.

d.

The expected return on debt is 8% pa.

e.

The expected return on equity is 23% pa.