Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D₀ = $0.90; P₀ = $47.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations.

a. 9.03%

b. 10.02%

c. 10.38%

d. 8.85%

e. 8.03%

Keys Printing plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 45.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

a. 0.36%

b. 0.42%

c. 0.44%

d. 0.35%

e. 0.30%