Golden State Home Health, Inc., is a large, California-based for-profit home health agency. Its dividends are expected to grow at a constant rate of 5 percent per year into the foreseeable future. The firms last dividend (Do) was $1, and its current stock price is $10. The firms beta coefficient is 1.2; the rate of return on a 20 year T-bond currently is 8 percent; and the expected rate of return on the market, as reported by a large financial services firm, is 14 percent. Golden States target capital structure calls for 60 percent debt financing, the interest rate required on its new debt is 9 percent, and the firms tax rate is 30 percent.

a. What is the firms cost of equity estimate according to the DCF method?
b. What is the firms cost of equity estimate according to the CAPM?
c. On the basis of your answer to Parts a and b, what would be your final estimate for the firms cost of equity?
d. What is your estimate for the firms corporate cost of capital?

Walsh company manufactures and sells one product. the following information pertains to each of the company’s first two years of operations: variable costs per unit: manufacturing: direct materials $ 25 direct labor $ 12 variable manufacturing overhead $ 5 variable selling and administrative $ 4 fixed costs per year: fixed manufacturing overhead $ 400,000 fixed selling and administrative expenses $ 60,000 during its first year of operations, walsh produced 50,000 units and sold 40,000 units. during its second year of operations, it produced 40,000 units and sold 50,000 units. the selling price of the company’s product is $83 per unit. required: 1. assume the company uses variable costing: a. compute the unit product cost for year 1 and year 2. b. prepare an income statement for year 1 and year 2. 2. assume the company uses absorption costing: a. compute the unit product cost for year 1 and year 2. b. prepare an income statement for year 1 and year 2. 3. reconcile the difference between variable costing and absorption costing net operating income in year 1.