Question 6

Suppose your company has an equity beta of 1.0 and the current risk-free rate is 6.0%. If the expected market risk premium is 8.6%, what is your cost of equity capital?

		8.1%
		9.6%
		10.3%
		14.6%.

Question 7

A stock sells for $20 per share, its next dividend expected to pay (D1) is $1.00, and its growth rate is a constant 6%. What is its cost of common stock?

		5.3%
		11.0%
		11.3%
		11.6%

Question 8

If a firm's before-tax cost of preferred stock is 10% and the firm has a 35% marginal tax rate, what is the firm's after-tax cost of preferred stock?

		6.5%
		3.5%
		10.0%
		None of above is correct.

Question 9

A company has preferred stock that can be sold for $100 per share. The preferred stock pays an annual dividend $10. Therefore, the cost of preferred stock is:

		5.67%
		5.0%
		9.43%
		10.0%

Question 10

A firm has a target capital structure of 30% debt, 20% preferred stock, and 50% common equity. The company's after-tax cost of debt is 5%, its cost of preferred stock is 10%, and its cost of retained earnings is 12%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?

		8.0%
		9.50%
		9.10%
		10.80%.