Sapp Trucking's balance sheet shows a total of noncallable $30 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 6.00%. This debt currently has a market value of $45 million. The balance sheet also shows that the company has 10 million shares of common stock, and the book value of the common equity (common stock plus retained earnings) is $65 million. The current stock price is $27.50 per share; stockholders' required return, r_s, is 14.00%; and the firm's tax rate is 25%. The CFO thinks the WACC should be based on market value weights, but the president thinks book weights are more appropriate. What is the difference between these two WACCs?

a. 1.40%

b. 1.05%

c. 1.23%

d. 0.79%

e. 1.66%

Nagel Equipment has a beta of 0.90 and an expected dividend growth rate of 3.30% per year. The T-bill rate is 4.00%, and the T-bond rate is 4.35%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 13.35%. Using the SML, what is the firm's required rate of return? Do not round your intermediate calculations.

a. 12.42%

b. 15.75%

c. 12.02%

d. 12.45%

e. 9.66%