1. Summarize how risk is evaluated in financial decision making, such as investing in stocks, mergers or other investment decisions.
2. Jeremy Inc. has a target capital structure that calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. The firm's current cost of debt can be estimated based on its 20-year bond that is issued 5 years ago. It has coupon rate of 9.6% S.E. Today it is priced at $1,125. The company’s tax rate is 35 percent. What is the firm's after tax cost of debt, net rd? 2.35% Correct! 4.69% 3.61% 7.22%