WACC

Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 25%, r_d = 7%, r_ps = 6.9%, and r_s = 10%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.

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2.

Cost of Equity: CAPM

Booher Book Stores has a beta of 1.1. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 8%. The market risk premium is 6.5%, and the return on an average stock in the market last year was 13%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

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