1. The cost of debt, preferred stock and common equity are 6%, 9.4% and 12%; respectively. The market value weights of debt, preferred stock and common equity are .30, .10 and .60. The company is in a 40% marginal tax bracket. What is its weighted average cost of capital?
a. 10.98%
b. 9.22%
c. 8.44%
d. 12.31%
e. 13.41%
2. Jumbo Trout stock just paid a $0.71 annual dividend, the dividends increase by 1.6 percent annually, and you require a 10 percent rate of return. How much would you be willing to pay for one share of Jumbo Trout stock?
$8.29
$8.36
$8.47
$8.53
$8.59