The companys cost of equity is 12 and its pretax cost of


1. You purchased 500 shares of preferred stock on January 1, 2001 for $50 per share. The stock pays an annual dividend of $8 per share. On December 31, 2001, the market price is $54 per share. What is your percentage return on the investment for the year?

2. A company has a weighted average cost of capital of 9.6%. The company’s cost of equity is 12%, and its pretax cost of debt is 7.9%. The tax rate is 35%. What is the company’s target debt-equity ratio?

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Financial Management: The companys cost of equity is 12 and its pretax cost of
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