Western Electric has 28,000 shares of common stock outstandi…

Western Electric has 28,000 shares of common stock outstanding at a price per share of $71 and a rate of return of 13.40 percent. The firm has 6,900 shares of 7.00 percent preferred stock outstanding at a price of $91.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $380,000 and currently sells for 107 percent of face. The yield to maturity on the debt is 7.84 percent. What is the firm’s weighted average cost of capital if the tax rate is 21 percent?

Assume a firm utilizes the security market line approach to…

Assume a firm utilizes the security market line approach to determine the cost of equity. If the firm currently pays an annual dividend of $3.36 per share and has a beta of 1.38, all else constant, which of the following actions will increase the firm’s cost of equity?