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QUESTION 7 You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The
QUESTION 7 You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 11.50%. The firm will not be issuing any new stock. What is its WACC? O a. 8.70% b. 8.87% c. 7.92% O d. 7.66% Oe. 6.70% QUESTION 8 Blatcher Timber Company hired your consulting firm to help them estimate the cost of equity. The yield on the firm's bonds is 12.00%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.85% over a firm's own cost of debt. What is an estimate of the firm's cost of equity from retained earnings? O a. 15.85% O b. 14.74% O c. 12.52% O d. 13.31% O e. 14.58%
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