1. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 11.50%. The firm will not be issuing any new stock. What is its WACC?

8.70%

8.90%

7.92%

7.66%

2. Taggart Inc.'s stock has a 50% chance of producing a 48% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -26% return. What is the firm's expected rate of return? Do not round your intermediate calculations.

20.40%

21.80%

18.16%

20.60%