The higher the corporate income tax rate

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1. The higher the corporate income tax rate, the lower the effective cost of

debt.

common stock.

preferred stock.

none of these

2. The stock of the Belta Corporation has a beta of 0.95. The stock recently paid an annual dividend of $0.45, and dividends are expected to grow at a rate of 4% indefinitely. The equity premium has averaged 5% in recent years, and it is expected to remain at this level for the foreseeable future. The relevant risk-free rate is 3%. what is the maximum price you should pay for a share of the Belta Corporation, according to CAPM?

A $12.08

B $11.61

C $17.55

D $12.48

Reference no: EM131618675

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