1. Suppose your company has an equity beta of 1.0 and the current risk-free rate is 6.0%. If the expected market risk premium is 8.6%, what is your cost of equity capital?

8.1%

9.6%

10.3%

14.6%.

2. A stock sells for $20 per share, its next dividend expected to pay (D1) is $1.00, and its growth rate is a constant 6%. What is its cost of common stock?

5.3%

11.0%

11.3%

11.6%

3. If a firm's before-tax cost of preferred stock is 10% and the firm has a 35% marginal tax rate, what is the firm's after-tax cost of preferred stock?

6.5%

3.5%

10.0%

None of above is correct.

4. A company has preferred stock that can be sold for $100 per share. The preferred stock pays an annual dividend $10. Therefore, the cost of preferred stock is:

5.67%

5.0%

9.43%

10.0%

5. A firm has a target capital structure of 30% debt, 20% preferred stock, and 50% common equity. The company's after-tax cost of debt is 5%, its cost of preferred stock is 10%, and its cost of retained earnings is 12%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?

8.0%

9.50%

9.10%

10.80%.