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5. You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help her
estimate the cost of capital. You have been provided with the following data: rRF
= 4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is the
cost of common from retained earnings?
6. Avery Corporations 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 common from retained earnings is 11.25%, and the tax rate
is 40%. The firm will not be issuing any new common stock. What is Avery's
WACC?

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  • 1. 5. You have been hired as a consultant by Feludi Inc.'s CFO, who wants you to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.30. Based on the CAPM approach, what is the cost of common from retained earnings? 6. Avery Corporations 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 common from retained earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Avery's WACC?