Reference no: EM132494461

Question 1: Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 25%, rd = 8%, rps = 8.9%, and rs = 14%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.

Question 2: Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 7%. The market risk premium is 7.5%, and the return on an average stock in the market last year was 14%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

Question 3: Summerdahl Resort's common stock is currently trading at $23 a share. The stock is expected to pay a dividend of $2.25 a share at the end of the year (D1 = $2.25), and the dividend is expected to grow at a constant rate of 3% a year. What is the cost of common equity? Round your answer to two decimal places.