Reference no: EM132538624
1) Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 10.00%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.)
Select the correct answer.
a. 8.93%
b. 8.73%
c. 8.78%
d. 8.83%
e. 8.88%
2) Kenny Electric Company's noncallable bonds were issued several years ago and now have 20 years to maturity. These bonds have a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000. If the firm's tax rate is 25%, what is the component cost of debt for use in the WACC calculation?
a. 6.03%
b. 5.44%
c. 6.35%
d. 6.67%
e. 5.73%
3) Avery Corporation's target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 25%. The firm will not be issuing any new common stock. What is Avery's WACC?
a. 9.55%
b. 8.49%
c. 9.94%
d. 9.19%
e. 8.83%
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