1. Rekall? Inc., the memory implant? company, has 7 million shares of common stock outstanding and? 100,000 semiminus−annual bonds. The bonds have 6 years to? maturity, a? 9.05% coupon rate and a face value of? $1,000 each. The common stock currently sells for? $29.94 and just paid a dividend of? $2.50. Dividends are paid annually and are expected to grow in perpetuity at? 3%. The bonds sell for? 94% of face value and have a? 10.42% yield to maturity. The market risk premium is? 5.5%, Tminus−bills are yielding? 5% and the tax rate is? 30%. What is the capital structure weight for? equity?
A. 0.67
B. 0.71
C. 0.68
D. 0.70
E. 0.69
2. Which step in the risk management process is most important?
Risk implementation
Risk evaluation
Risk identification
Risk treatment