1. Bay Inc. just paid its first annual dividend of $0.60 a share. The firm plans to increase the dividend by 3 percent per year indefinitely. What is the firm's cost of equity if the current stock price is $12 a share?

   		7.94 percent
   		9.16 percent
   		6.11 percent
   		8.15 percent

QUESTION 19

1. Eucalyptus Company is financed by $4 million in debt, $1 million in preferred stocks, and $5 million in common stocks. The pre-tax cost of debt is 6%, the cost of preferred stock is 8%, and the cost of equity is 14%. Calculate the weighted average cost of capital. Assume 20% tax rate.

   		9.72%
   		6.29%
   		7.26%
   		8.60%