Chapters 13 & 14 Rollins Corporation is examining its cost of capital. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equily. Its bonds have a 10 percent coupon, paid semiannually, a current malurity of 20 years, and sell for $849.54. The firm could sell, at par, S100 preferred stock which pays a 12 percent annual dividend. Rollins' beta is 1.2. the risk-free rate is 10 percent, and the market risk premium is 5 percent. Rollins is a constant growth firm which just paid a dividend of $2.00, common stock sells for $27.00 per share, and has a growth rate of 8 percent, and the firm's marginal tax rate is 40 percent What is Rollins' after tax cost of debt? 1 2. 3. What is the firm's cost of preferred stock? 4. What is Rollins' cost of equity using the CAPM approach? S. What is the firm's cost of equity using the dividend growth model approach? 6 What is Rollins' WACC? 7 Market risk'is referred to as 8 A rate of return that plots above the security market line: 9. Asset A has an expected return of 12.5 percent and a beta of 1.15. What is the market's reward-to-risk ratio if the risk-free rate is 3.9 percent