A firm has a debt-to-equity ratio of 3:1.

The firms debt beta is 0.8.

Five-year government bonds yield 5% pa with a coupon rate of 4% pa. The market's expected dividend return is 5% pa and its expected capital return is 5% 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 2% pa forever. The current stock price $20.

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 0.7.

b.

The firms after-tax WACC is 7.725% pa.

c.

The beta of the firms assets is 0.95.

d.

The expected return on debt is 9% pa.

e.

The expected return on equity is 12% pa.