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 firm's equity is 3.6.

b.

The beta of the firms assets is 2.1.

c.

The expected return on equity is 23% pa.

d.

The firms after-tax WACC is 11.4% pa.

e.

The expected return on debt is 8% pa.