# Maxwell Inc.’S Stock Has A 50% Chance Of Producing A 25% Return

Maxwell Inc. ‘s stock has a 50% chance of producing a 25% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is the firm’s expected rate of return?A. 2. 33%B. 9. 90%C. 5. 0%D. 21. 1%Bosio Inc. ‘s perpetual preferred stock sells for \$97. 50 per share, and it pays an \$8. 50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4. 00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC?A. 8. 5%B. 4. 0%C. 9. 08%D. 8. 72%To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9. 25% annual coupon, paid semiannually, sells at a price of \$1,075, and has a par value of \$1,000. If the firm’s tax rate is 40%, what is the component cost of debt for use in the WACC calculation?A. 8. 65%B. 5. 19%C. 4. 23%D. 8. 46%Eakins Inc. ’s common stock currently sells for \$45. 00 per share, the company expects to earn \$2. 75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6. 00%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of equity (%) of the new stock exceed the cost of equity of retained earnings?A. 8. 0%B. 0. 37%C. 10. 28%D. 10. 65%