1. Badger Corp. has an issue of 6% bonds outstanding with 6 months left to maturity. The bonds are currently priced at $1001, and pay interest semiannually. The firm's marginal tax rate is 40%. The estimated risk premium between the company's stock and bond returns is 5%. The firm's expects to maintain a capital structure with 40% debt and 60% equity going forward. The company's W.A.C.C. is ____%.
2. Suppose an investor buys 10 shares of stock priced at $55.10 and sells the stock one year later for $56.30 after collecting a $0.30 dividend per share. What was the investor’s pre-tax holding period return? If dividend income is taxed at a 28% rate and capital gains are taxed at 20%, what was the investor’s after-tax holding period return?