Financial Statement Information:

Sales $1,000

Net Income $50

Total Assets $2,000

Total Debt $1,000

Shareholder equity $750

Tax Rate 25%

The debt consists of 5% coupon bonds with semi-annual payments with yeild to maturity of 5%. 100 mill shares of stock outstanding.

Market price per share $40

VOL's Stock's Beta 1.75

Risk Free Rate 3%

Expected Return on the market 9.5%

Calculate the DCF (dividend growth model) required return n VOL common stock.

a. 11.0%

b. 6.0%

c. 6.7%

d. 5.3%

e. 9.9%