Use the following information for Questions 26 - 31.

Please calculate a firms WACC (weighted average cost of capital) using the following information:

• The firms ROE is 12% and its Payout Ratio is 40%
• The firm has 9 million shares outstanding, each of which trades at a price of $11. The firm expects to pay a dividend of $1.50 at the end of the year.
• The firm has outstanding debt with a face value of $70 million. These are all 20-year bonds with a 5% coupon (paid semi-annually) and they are selling at a price of $1,352.11 per $1,000 bond.
• The yield on Treasury bills is 2.5%.
• The return on the market is 7%.
• The firms beta is 2.
• The firms tax rate is 30%.

What is the firms growth rate, calculated using ROE and the Payout Ratio?

Multiple Choice

• 5.82%

• 6.90%

• 7.20%

• 8.10%

Multiple Choice

• 2.71%

• 1.87%

• 3.25%

• 6.28%

What proportion of the firms capital structure is comprised of debt?

Multiple Choice

• 31.75%

• 48.88%

• 75.25%

• 26.53%

What is the firms cost of equity using CAPM Model?

Multiple Choice

• 17.5%

• 11.5%

• 15.5%

• 19.5%

What is the firms cost of equity using the Dividend Discount Model?

Multiple Choice

• 23.78%

• 21.29%

• 25.32%

• 20.84%