1. The following information relates to the Atlas Division of Global Enterprises:

Interest rate on debt capital: 8%

Cost of equity capital: 12%

Market value of debt capital: $45 million

Market value of equity capital: $75 million

Income tax rate: 30%

On the basis of this information, Atlas's weighted-average cost of capital is closest to (Do not round your intermediate calculations.):

3.65%.

8.58%.

9.60%.

10.50%.

None of these.

2. Assume that the average firm in your company’s industry is expected to grow at a constant rate of 3.70% and that its dividend yield is 4.70%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&D work that leads you to expect that its earnings and dividends will grow at a rate of 47.00% this year and 57.00% the following year, after which growth should return to the 3.70% industry average. If the last dividend paid was $1.70, what is the estimated value per share of your firm’s stock?

$90.489

$81.014

$86.566

$79.314