1. Following information for Golden Fleece Financial:
Long-term debt outstanding $380,000
Bond rating AAA
Current yield to maturity (rD): 7%
Number of shares of common stock: 14,000
Price per share: $50.80
Book value per share: $33.00
Expected rate of return on stock (rE): 14%
2. Calculate Golden Fleece's unlevered (all-equity) cost of capital. Assume continuous leverage rebalancing.
a. 12.40%
b. 11.12%
c. 11.56%
d. 14.50%