The risk-free rate is 2 and the expected return on the


1. BMW Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 7%. BMW believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is BMW's after-tax cost of debt?

2. Nike Inc. has a beta of 1.2. The risk-free rate is 2% and the expected return on the market is 8%. What is the required rate of return on Nike's stock?

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Financial Management: The risk-free rate is 2 and the expected return on the
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