A company has common stock with a market value of $20 million and a
debt with a market value of $10 million. The cost of the debt is 14
percent. The current Treasury-bill rate is 8 percent, and the expected
market premium is 10 percent. The beta on the company's equity is 0.9.
What is the company's debt-equity ratio? and What is the company's
overall required return?

Hi cop189!!

E = equity = Common stock and preferred stock.
D = debt = obligations or liability to pay or render.
rE = cost of equity
rD = cost of debt
rF = risk free rate = Treasury-bill rate
rP = market risk premium 
rW = overall required return

What is the company's debt-equity ratio?

"                      Total Liabilities 
Debt-Equity Ratio =  --------------------- 
                      Shareholders Equity  
 
Indicates what proportion of equity and debt that the company is using
to finance its assets. Sometimes investors only use long term debt
instead of total liabilities for a more stringent test."
http://www.investopedia.com/university/ratios/debtequity.asp
 
Debt-Equity Ratio = $10 million / $20 million = 0.5

                           ------------------------

What is the company's overall required return?

Using the CAPM to find rE we have that:

rE = rF + rP * BETA =
   = 0.08 + 0.10 * 0.9 = 
   = 0.17

The overall required return is the weighted average cost of capital;
in this case no taxes was set, then we have:

rW = rE * E/(E+D) + rD * D/(E+D) =
   = 0.17 * 20/30 + 0.14 * 10/30 =
   = 0.16

 --------------------------------------------------------

I hope that this helps you. Feel free to request for a clarification
if you need it.

Regards.
livioflores-ga

Say a stock price is currently at $50 per share and is expected to pay
a year end dividend of $2.50 per share.  The dividend is expected to
grow at a constant rate of 4% per year.  The company has insufficient
retained earnings to fund capital projects and must, therefore, issue
new common stock.  The new stock has an estimated flotation cost of $3
per share.  What is the company's cost of equity capital?

Project A costs $20,000 and is expected to produce cash flows of
$7,000 per year for four years.  Project B costs $35,000 and is
expected to produce cash flows of $11,000 per year.
What is the payback for each project?
What is the IRR for each?
What is the MIRR for each?
If the cost of capital (hurdle rate) is 12%, what is the net present value of each?
What project would be accepted and why?