Security Beta Standard deviation Expected return Market 1.0 10% 6.0% Risk-free 0.0 2% 2.0% Firm A 1.5 30% ()% . Firm B 20% 7.0% Firm C 2.0 25% ( )% 2. Answer the questions. 1) The current stock price for Firm D is $100 while the next dividend is $15. Suppose that the dividend is expected to grow at 5% every year. Figure out the cost of equity for Firm D based on Dividend growth model. (30points) 2) Figure out the cost of debt if the bond price for Firm D is $930 for the 5-year bond with a par value of $1,000 and a coupon rate of 8% paid semi-annually. (30points) 3) The tax rate is 50%. Firm D has a Debt-to-Equity ratio (D/E) of 1/2. i) Figure out the debt-to-firm value (D/V). ii) Figure out the weighted average cost of capital of Firm D (WACC). (40points) 4) What is the relationship between WACC and capital budgeting? For example, does a higher WACC lead to more or less acceptance for a project? (20points)