1. The higher the corporate income tax rate, the lower the effective cost of
debt.
common stock.
preferred stock.
none of these
2. The stock of the Belta Corporation has a beta of 0.95. The stock recently paid an annual dividend of $0.45, and dividends are expected to grow at a rate of 4% indefinitely. The equity premium has averaged 5% in recent years, and it is expected to remain at this level for the foreseeable future. The relevant risk-free rate is 3%. what is the maximum price you should pay for a share of the Belta Corporation, according to CAPM?
A $12.08
B $11.61
C $17.55
D $12.48