Filer Manufacturing has 8.6 million shares of common stock outstanding. The current share price is $50, and the book value per share is $4. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $66 million, has a 6 percent coupon, and sells for 94 percent of par. The second issue has a face value of $58.48 million, has a 6 percent coupon, and sells for 96.6 percent of par. The first issue matures in 10 years, the second in 7 years.

The most recent dividend was $3.4 and the dividend growth rate is 4.8 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 34 percent.

Required:

What is the company's WACC? (Do not round your intermediate calculations.)

Multiple Choice

• 10.3%

• 10.78%

• 10.5%

• 9.78%

• 9.88%

The Up and Coming Corporation's common stock has a beta of 1. If the risk-free rate is 4 percent and the expected return on the market is 11 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)

Multiple Choice

• 11.55%

• 11.44%

• 15%

• 11%

• 10.45%

Chelsea Fashions is expected to pay an annual dividend of $0.80 a share next year. The market price of the stock is $22.40 and the growth rate is 5 percent. What is the firm's cost of equity?

Multiple Choice

• 7.58 percent

• 9.00 percent

• 7.91 percent

• 8.24 percent

• 8.57 percent

Stock in Country Road Industries has a beta of 0.95. The market risk premium is 8 percent, and T-bills are currently yielding 4.5 percent. The company's most recent dividend was $1.9 per share, and dividends are expected to grow at a 5.5 percent annual rate indefinitely. If the stock sells for $39 per share, what is your best estimate of the company's cost of equity? (Do not round your intermediate calculations.)

Multiple Choice

• 10.64%

• 12.1%

• 9.43%

• 11.37%

• 7.83%