2a. Capital Autos Corp. has a target capital structure of 60% common stock, 5% preferred stock and 35% debt. Its cost of equity is 9%, the cost of preferred stock is 6%, and the cost of debt is 5%. The marginal tax rate for the firm is 35%. Calculate the weighted average cost of capital (WACC). 15 pt. 3. A stuck had returns of 2%, -3%, 6%, 6%, 16%, over the last five years, Calculate: Arithinetic mean (5 pts) h. Geometric mean (6 pts) 2b. If the variance ABC's stock is 0.49% while its expected return is 18%. What is its coefficient of variation? (5 pt.)
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Determine the cost of each component of capital: - Common Stock: The cost of common stock can be estimated using the dividend discount model (DDM) or the capital asset pricing model (CAPM). Let's assume the cost of common stock is 10%. - Preferred Stock: The cost Show more…
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