1. What is the PallMall Corp’s weighted average cost of capital if its cost of pre-tax debt is 11% (25% of overall capital structure), its cost of preferred stock is 9.5% (15% of capital structure) and its cost of equity is 15.5% (60% of the capital structure)? The marginal tax rate is 35%.
a. 13.5% b. 12.3% c. 11.7% d. 12.5%
2. A stock you bought at $40 has a $20 paper (unrealized) gain. You’ve no reason to think the price will fall, but you’re nervous the stock has risen too high, too fast. You don't want to lose too much of your gain if the stock price falls, but you also want to give the stock a chance to rise higher. What order should you place?
A) Limit order to sell 60
B) Limit order to sell at 57
C) Stop order to sell at 62
D) Stop order to sell at 58