Under what situations would you want to use the capm

Question

Instructions

1.  Under what situations would you want to use the CAPM approach for estimating the component cost of equity? The constant-growth model?
2. Cost of Equity JaiLai Cos. stock has a beta of 1.2, the current risk-free rate is 4.2 percent, and the expected return on the market is 12 percent. What is JaiLai's cost of equity?
3. Cost of Debt KatyDid Clothes has a $250 million (face value) 30-year bond issue selling for 103 percent of par that carries a coupon rate of 7.95 percent, paid semiannually. What would be Katydid's before-tax component cost of debt?
4. Cost of Preferred Stock Marme, Inc. has preferred stock selling for 97.5 percent of par that pays an 8 percent annual coupon. What would be Marme's component cost of preferred?
5. WACC Suppose that JB Cos. has a capital structure of 75 percent equity, 25 percent debt, and that its before-tax cost of debt is 9 percent while its cost of equity is 15 percent. If the appropriate weighted average tax rate is 30 percent, what will be JB's WACC?