1. Suppose risk-free rate on Treasury bonds is 2% and the current market return is 10% and the beta of a company's stock is estimated to be 1.5, what is the company's cost of equity (retained earnings)?
15.10%
15.35%
14.80%
14.15%
14.00%
2. Donati Company's preferred stock sells for $86.00 per share, and it pays an $9.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 3.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?
12.29%
12.05%
11.68%
11.39%
11.87%