1. Fama's Llamas has a weighted average cost of capital of 9 percent. The company's cost of equity is 14 percent, and its pretax cost of debt is 8 percent. The tax rate is 38 percent. What is the company's target debt-equity ratio?
2. An investor purchases a mutual fund for $40. The fund pays dividends of $1.10, distributes a capital gain of $2, and charges a fee of $2 when the fund is sold one year later for $44.90. What is the net rate of return from this investment?