Suppose you observe the following situation When we ponder forming a portfolio of these two stocks, we would notice: The two stocks are positively correlated. Diversifying by holding both stocks might be a good idea to reduce portfolio risk. Because the expected return of A is higher than B. it is never a good idea to bold stock B. It is never a good idea to hold stock A. Stronger Things Corp.'s common stock has a beta of 1.18. The stock price of Stranger Things is $42.29. The dividend expected over the next year is $2.62. Dividends have been growing at 3.8% annually. What is Stranger Things Corporations' cost of equity capital? 7% 8% 9% 10% The Sixth Seventh Bank has an issue of preferred stock with an $8.40 stated annual dividend that just sold for $70 per share. What is the bank's cost of preferred stock? 9.43% 8.37% 11.43% 12.00% Shadowhunters issued a 9year, 8 percent annual payment note. Due to the fear surrounding this issue, though its face value was $1,000. it sold at a discount at 93.0 percent of its face value, or $930. Shaadowhunters' tax rate is 30 percent. What is Shadowhunters' after-tax cost of debt? 8.533% 8.00% 9.176 % 6.423 % Doctor Strange Corporation has a target capital structure of 40 percent common stock and 60 percent debt. Its cost of equity is 12 percent and the cost of debt is 6 percent before adjusting for taxes. The relevant tax rate is 40 percent. What is Doctor Strange's WACC? It is between 6 and 8 %. It is between 8 and 9% It is between 9 and 10 %. It is more than 10%. If Doctor Strange (information in Problem 16) decided to reduce its use of debt from 60% to 50% and to increase the percent of common stock to 50%, and if all the rates remained unchanged, then: Doctor Strange's WACC would not change. Doctor Strange's WACC would decline. Doctor Strange's WACC would rise. Doctor Strange's WACC would rise and then decline as that amount of debt rises