A -

Hampton Corporation has a beta of 1.35 and a marginal tax rate of 34%. The expected return on the market is 14% and the risk-free interest rate is 2.18%. Estimate the firms cost of internal equity. SET YOUR CALCULATOR TO 4 DECIMAL PLACES AND ROUND TO 2 DECIMAL PLACES AT THE END. DO NOT ENTER THE % SIGN. IF YOUR ANSWER IS 7.7000%, FOR EXAMPLE, ENTER 7.70.

B -

Hampton Corporation has a capital structure of 40% debt and 60% common equity. This capital structure is expected not to change. The firm's tax rate is 34%. The firm can issue the following securities to finance capital investments:

Debt: Capital can be raised through bank loans at a pretax cost of 8.0%. Also, bonds can be issued at a pretax cost of 7.9%.

Common Stock: Retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $59. Flotation costs will be $4 per share. The recent common stock dividend was $5.86. Dividends are expected to grow at 4% in the future.

What is the cost of external equity?

PLEASE INPUT THE ANSWER IN PERCENT ROUNDING IT TO 2 DECIMALS. DO NOT INCLUDE % SIGN, E.G., INSTEAD OF 9.9922% INPUT 9.99

B -