The firm weighted average cost of capital

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1. Etling Inc.'s dividend is expected to grow at 8% for the next two years and then at 4% forever. If the current dividend is $3 and the required return is 16%, what is the price of the stock?

a. $27.93

b. $25.54

c. $26.00

d. $25.10

e. $29.45

2. Watson's Automotive has a $400,000 bond issue outstanding that is selling at 70 percent of face value. Watson's also has 21,000 shares of common stock outstanding with a market price of $21 a share. What is the weight of the debt as it relates to the firm's weighted average cost of capital?

a. 42 percent

b. 37 percent

c. 46 percent

d. 40 percent

e. 48 percent

Reference no: EM132020321

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