1. Bohannon Corporation’s common stock has a beta of 1.30. Assume the risk-free rate is 5.1 percent and the expected return on the market is 14.0 percent. Required: What is the company’s cost of equity capital? 17.80% 20.63% 17.92% 23.30% 16.67%
2. Fama's Llamas has a weighted average cost of capital of 9 percent. The company's cost of equity is 16 percent, and its pretax cost of debt is 10 percent. The tax rate is 36 percent. What is the company's target debt-equity ratio?