Question 1: The preferred stock of Nadine Fashions pays an annual dividend of $2.3 a share and sells for $45 a share. The tax rate is 34 percent. What is the firm's cost of preferred stock?
- 2.73 percent
- 5.93 percent
- 5.11 percent
- 4.56 percent
- 6.12 percent
Question 2: The common stock of Pittsburgh Steel Products has a beta of 1.52 and a standard deviation of 16.75 percent. The market rate of return is 9 percent and the risk-free rate is 3 percent. What is the cost of equity for Pittsburgh Steel Products?
- 12.12 percent
- 10.05 percent
- 9.09 percent
- 10.30 percent
- 13.89 percent
Question 3: Last week, Lester's Electronics paid an annual dividend of $2.75 on its common stock. The company has a longstanding policy of increasing its dividend by 3 percent annually. This policy is expected to continue. What is the firm's cost of equity if the stock is currently selling for $42.5 a share?
- 9.66 percent
- 7.77 percent
- 8.80 percent
- 7.22 percent
- 9.91 percent