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1. An investor thinks a stock's expected return will exceed its required return expected market price will be higher than the one derived from the dividend growth model, this suggest that the investor thinks
a. the stock should be sold.
b. management is probably not truing to maximize the price per share.
c. the stock is a good buy.
d. the stock is experiencing supernormal growth.
2. Brasil Growth Company has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock. the company's tax rate is 40%. the before-tax cost of debt os 6%, cost of preferred stock is 5.8%, and cost of common equity is 12%. what is its WACC?
a. 10.20%
b. 12.00%
c. 8.97%
d. 9.17%
please, show me your solution.
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