1. Lamey Co. has an unlevered cost of capital of 10.9 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $21,800. The company has $25,000 in bonds outstanding that sell at par and have a coupon rate of 6 percent. What is the cost of equity?
14.29 percent
14.07 percent
11.60 percent
15.64 percent
13.36 percent
2. A stock has a beta of 1.65, the expected return on the market is 12 percent, and the risk-free rate is 4.8 percent. What must the expected return on this stock be?
17.51%
17.35%
15.85%
16.68%
24.6%