| - A. B. C. D. E. | Target capital structure: 64% debt, 13% preferred stock and 23% common equity. Yield to maturity on bonds: 4.2%; Preferred stock dividend: $6.96 per year; current market price of preferred stock is $69.46. CAPM data for common equity: risk-free rate is 4.0%; market risk premium for the average stock is 4.0%; ABC has a beta of 2.23. ABC's marginal tax rate is 40%." |
| - A. B. C. D. E. | Target capital structure: 65% debt, 8% preferred stock and 27% common equity. Yield to maturity on bonds: 4.7%; Preferred stock dividend: $7.80 per year; current market price of preferred stock is $70.30. CAPM data for common equity: risk-free rate is 3.3%; market risk premium for the average stock is 6.5%; ABC has a beta of 1.71. ABC's marginal tax rate is 40%. |
| - A. B. C. D. E. | Target capital structure: 63% debt, 10% preferred stock and 27% common equity. Yield to maturity on bonds: 4.5%; Preferred stock dividend: $6.49 per year; current market price of preferred stock is $68.99. CAPM data for common equity: risk-free rate is 3.1%; market risk premium for the average stock is 5.7%; ABC has a beta of 1.59. ABC's marginal tax rate is 40%. |
| - A. B. C. D. E. | Target capital structure: 64% debt, 12% preferred stock and 24% common equity. Yield to maturity on bonds: 4.0%; Preferred stock dividend: $6.64 per year; current market price of preferred stock is $69.14. CAPM data for common equity: risk-free rate is 3.9%; market risk premium for the average stock is 4.1%; ABC has a beta of 2.08. ABC's marginal tax rate is 40%. |
| - A. B. C. D. E. | Target capital structure: 57% debt, 9% preferred stock and 34% common equity. Yield to maturity on bonds: 4.4%; Preferred stock dividend: $7.54 per year; current market price of preferred stock is $70.04. CAPM data for common equity: risk-free rate is 4.7%; market risk premium for the average stock is 4.3%; ABC has a beta of 2.14. ABC's marginal tax rate is 40%. |
