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1.

Trahan Lumber Company hired you to help estimate its cost of capital. You obtained the following data: D₁ = $1.75; P₀ = $30.00; g = 7.00% (constant); and F = 10.00%. What is the cost of equity raised by selling new common stock?

		13.75%
		13.48%
		11.07%
		12.35%

2.

Weaver Chocolate Co. expects to earn $13.50 per share during the current year, its expected dividend payout ratio is 75%, its expected constant dividend growth rate is 16.0%, and its common stock currently sells for $155.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 7% would be incurred. What would be the cost of equity from new common stock? Do not round your intermediate calculations.

	a.	21.49%
	b.	23.02%
	c.	20.77%
	d.	22.42%

3

You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 10.50%, and the tax rate is 25%. The firm will not be issuing any new stock. What is Quigley's WACC? Round final answer to two decimal places. Do not round your intermediate calculations.

	a.	6.73%
	b.	6.97%
	c.	6.11%
	d.	8.08%

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