What is the required rate of return for transom company

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Reference no: EM132072821

1. Enman 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 40%. If the firm will not be issuing any new common stock, what is Enman's WACC?

a) 9.54%

b) 9.27%

c) 8.82%

d) 8.15%

2. if investors in Transom Company expect a 4.0% rate of inflation in the future, and the real risk-free rate is 3.0%, the market risk premium is 5.0%, beta is 1.00, and its realized rate of return has averaged 15.0% over the last 5 years, what is the required rate of return for Transom Company?

a) 12.60%

b) 12.00%

c) 11.40%

d) 10.83%

Reference no: EM132072821

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