1. Enman Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. If the firm will not be issuing any new common stock, what is Enman's WACC?
a) 9.54%
b) 9.27%
c) 8.82%
d) 8.15%
2. if investors in Transom Company expect a 4.0% rate of inflation in the future, and the real risk-free rate is 3.0%, the market risk premium is 5.0%, beta is 1.00, and its realized rate of return has averaged 15.0% over the last 5 years, what is the required rate of return for Transom Company?
a) 12.60%
b) 12.00%
c) 11.40%
d) 10.83%