Question

1- Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at rd = 10%, and its common stock currently pays a $3.75 dividend per share (D0 = $3.75). The stock's price is currently $26.50, its dividend is expected to grow at a constant rate of 7% per year, its tax rate is 25%, and its WACC is 15.15%. What percentage of the company's capital structure consists of debt? Do not round intermediate calculations. Round your answer to two decimal places.

2-Pearson Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 12.90%. What is Pearson's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1