• How I can solve these questions to get the correct answeres?

  What is the weighted average cost of capital of a firm with twenty million dollars of preferred stock (cost of preferred is 6.5%), fifty-five million dollars of equity (cost of equity is 11.7%), and twenty-five million dollars of debt (cost of debt is 4.0% before taxes, which are 20% for this firm)?

  Correct Answer:

  8.54

• A firm is paying dividends of $1.24 at t = 1 (This is next year!) which will then grow at rate of 11% for only a single year, and then then grow at the rate of 5% into the foreseeable future What should be the price of this firms stock if you think you should get a rate of return of 7% for holding the stock.

  Correct Answer:

  65.48