1. Suppose a firm estimates its WACC to be 10%. Should the WACC be used to evaluate all of its potential projects, even if they vary in risk? If not, what might be "reasonable" costs of capital for average-, high-, and low-risk projects?
2. Zen Tek Corp's next expected dividend, D1, is $3.05; its growth rate is 6.1%; and its common stock now sells for $35.10. New stock (external equity) can be sold to net $33.20 per share. What is Zen Tek Corp's cost of retained earnings, rs? Round your answer to two decimal places. Show your work to receive full credit.