1. Suppose your company has an equity beta of 1.0 and the current risk-free rate is 6.0%. If the expected market risk premium is 8.6%, what is your cost of equity capital?
8.1%
9.6%
10.3%
14.6%.
2. A stock sells for $20 per share, its next dividend expected to pay (D1) is $1.00, and its growth rate is a constant 6%. What is its cost of common stock?
5.3%
11.0%
11.3%
11.6%
3. If a firm's before-tax cost of preferred stock is 10% and the firm has a 35% marginal tax rate, what is the firm's after-tax cost of preferred stock?
6.5%
3.5%
10.0%
None of above is correct.
4. A company has preferred stock that can be sold for $100 per share. The preferred stock pays an annual dividend $10. Therefore, the cost of preferred stock is:
5.67%
5.0%
9.43%
10.0%
5. A firm has a target capital structure of 30% debt, 20% preferred stock, and 50% common equity. The company's after-tax cost of debt is 5%, its cost of preferred stock is 10%, and its cost of retained earnings is 12%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?
8.0%
9.50%
9.10%
10.80%.