Hired as consultant to help determine their cost of capital

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Reference no: EM131986737

1. To help them estimate the company's cost of capital, Hurley Company has hired you as a consultant. You have been provided with the following data: D1 = $1.55; P0 = $22.50; and g = 6.50% (constant). Based on the DCF approach, what is the cost of common equity from reinvested earnings?

A. 11.10%

B. 11.68%

C. 12.30%

D. 13.39%

2. General Electric's target capital structure is 40% debt, 15% preferred stock, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred stock is 7.50%, and the cost of common stock using reinvested earnings is 12.50%. The firm will not be issuing any new stock. You were hired as a consultant to help determine their cost of capital.

A. 9.15%

B. 9.41%

C. 9.54%

D. 9.83%

Reference no: EM131986737

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