1. The Bamboo Inc. has a cost of equity of 16 percent and a pre-tax cost of debt of 8 percent. The firm's target weighted average cost of capital is 12 percent and its tax rate is 20 percent. What is the firm's debt-equity ratio (D/E)?

   		0.72
   		0.89
   		1.16
   		0.97

2. Eucalyptus Company is financed by $4 million in debt, $1 million in preferred stocks, and $5 million in common stocks. The pre-tax cost of debt is 6%, the cost of preferred stock is 8%, and the cost of equity is 14%. Calculate the weighted average cost of capital. Assume 20% tax rate.

   		9.72%
   		6.29%
   		7.26%
   		8.60%