1. The weighted average cost of capital for a firm with debt is the:
Discount rate that the firm should apply to all of the projects it undertakes.
Rate of return a firm must earn on its existing assets to maintain the current value of its stock.
Coupon rate the firm should expect to pay on its next bond issue.
Minimum discount rate the firm should require on any new project.
Rate of return shareholders should expect to earn on their investment in this firm.
2. What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 8% of par, and a current market price of (a) $68.00, (b) $88.00, (c) $120.00, and (d) $142.00? Round your answers to two decimal places.