1. A firm’s common stock is expected to pay a dividend of $3.50 per share in one year. This dividend is expected to grow at a rate of 7% forever. If the current market price for a share is $67, what is the cost of common stock for the firm?
2. General Motor has the following capital structure: Common Stock 45%, Preferred Stock 15%, and Debt 40%. The cost for each type of capital is: Common Stock 12%, Preferred Stock 10%, and Debt 8%. What is the weighted average cost of capital (WACC) for GM?
3. Microsoft has a WACC 9% with no preferred stock. Its cost of equity is 10% and after tax cost of debt is 6%. What is the weight of debt in its capital structure?