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1) Fama's Llamas has a weighted average cost of capital of 13 percent. The company's...

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Finance

1) Fama's Llamas has a weighted average cost of capital of 13 percent. The company's cost of equity is 18 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 31 percent. What is the company's target debt-equity ratio?

  • 0.9091

  • 0.6709

  • 0.607

  • 0.639

  • 0.6645

2) Stock in Daenerys Industries has a beta of 1.14. The market risk premium is 8.5 percent, and T-bills are currently yielding 4.5 percent. The company's most recent dividend was $1.7 per share, and dividends are expected to grow at a 7 percent annual rate indefinitely. If the stock sells for $35 per share, what is your best estimate of the company's cost of equity?

  • 10.83%

  • 13.19%

  • 9.06%

  • 14.19%

  • 12.2%

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