problem 1: Suppose the RiskFree Rate is 8%, the Expected Return this year on the S&P 500 stock market index is 13%, and the stock of Joe's Junkyard has a Beta of 1.4. Given these conditions, what is the required rate of return for Joe's stock?
a. 8%
b. 13%
c. 15%
d. 21%
problem 2: To raise money to finance the capital budget projects you've been evaluating, your firm plans to borrow money at an interest rate of 14%, before-tax. If your firm's effective tax rate is 40%, what is the aftertax cost in percent of the new loan?
a. 15.96%
b. 14.40%
c. 14.00%
d. 8.40%
e. 5.60%