The higher the corporate income tax rate

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Reference no: EM131618675

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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