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1) A company is operating in two areas of the economy (sectors or industries) and the divisional betas are presented below: Beta                      Value Division A                            1

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1) A company is operating in two areas of the economy (sectors or industries) and the divisional betas are presented below:

Beta                      Value

Division A                            1.95                      $420,000

Division B                            .52                        $780,000

Division C                            .98                        $920,000

Division D                            1.35                       $360,000

1.                What is the company's beta?

 

 

2) Foe Corporation's has the capital structure given below:

Debt (at market value)                                    $8,000,000

Preferred stock (at market value)                    $1,000,000

               Common stock (at market value)                    $6,000,000

 

Assuming the market weight are also the target weights for Foe Corp. please calculate the weights that should be used to find the weighted average cost of capital for Foe Corp.?

if the after-tax cost of debt is 8% the cost of preferred stock is 9% and the cost of common stock is 10%, what is the weighted average cost of capital?