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##### (Cost of debt) Gillain Stationary Corporation need to raise $608,000

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9.1 (Cost of debt) Gillain Stationary Corporation need to raise $608,000 to improve its;manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon;rate of 8.8 percent with interest paid semiannually and a 15 year maturity. Investors require a;rate of return of 10.7 percent.;a. Compute the market value of the bonds.;b. How many bonds will the firm have to issue to receive the needed funds?;c. What is the firms after tax cost of debt if the firms tax rate is 34 percent?;d. What is the semiannual interest payment of the bond?;10.1 (cost of debt) Sincere Stationery Corporation needs to raise $543,000 to improve its;manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon;rate of 10.3 percent with interest paid semiannually and a 15 year maturity. Investors require a;rate of return of 8.3 percent.;a. compute the market value of the bonds.;b. How many bonds will the firms have to issue to receive the needed funds?;c. What is the firms after tax cost of debt if the firms tax rate is 34 percent?;d. What is the semiannual interest payment of the bond? (round to the nearest dollar);11.1 (Weighted average cost of capital) The target capital structure for QM Industries is 39;percent common stock, 14 percent preferred stock, and 47 percent debt. If the cost of common;equity for the firm s 18.5 percent, the cost of preferred stock is 10.3 percent, the before tax cost;of debt is 8.4 percent, and the firms tax rate is 35 percent. What is QMs weighted average cost;of capital? (round to three decimal places);12.1 (Weighted average cost of capital) Cryton Electronics has a capital structure consisting of;42 percent common stock and 58 percent debt. A debt issue of $1,000 par value, 6.34 percent;bonds that mature in 15 years and pay annual interest will sell for $970. Common stock of the;firm is currently selling for $30.75 per share and the firm expects to pay a $2.21 dividend next;year. Dividends have grown at the rate of 5.5 percent per year and are expected to continue to;do so for the foreseeable future. What is Cryptons cost of capital where the firms tax rate is 30;percent?;a. The after-tax cost of debt ____%.;b. Calculate Cryptons cost of common equity?;c. Calculate Cryptons cost of capital;13.1 Weighted average cost of capital) As a member of the Finance Department of Ranch;Manufacturing your supervisor has asked you to compute the appropriate discount rate to use;when evaluating the purchase of new packaging equipment for the plant. Under the assumption;that the firms present capital structure reflects the appropriate mix of capital sources for the;firm, you have determined the market value of the firms capital structure.;Source of Capital;Bonds;Preferred stock;Common stock;Market Values;$4,400,000;$1,600,000;$6,100,000;To finance the purchase, Ranch Manufacturing will sell 10 year bonds paying interest at a rate;of 7.2 percent per year (with semiannual payment) at the market price of $1,037. Preferred;stock paying a $2.01 dividend can be sold for $25.75. Common stock for Ranch Manufacturing;is currently selling for $55.08 per share and firm paid a $3.01 dividend last year. Dividends are;expected to continue growing at a rate of 4.7 percent per year into the indefinite future. If the;firms tax rate is 30 percent, what discount rate should you use to evaluate the equipment;purchase?;a. Calculate component weights of capital.;b. What is the weight of debt in the firms capital structure? (Round to two decimal places);14.1 (Flotation costs and NPV analysis) The Faraway Moving Company is involved in a;major plant expansion that involves the expenditure of $180 million in the coming year. The;firm plans on financing the expansion through the retention of $148 million in firm earnings;and by borrowing the remaining $32 million. In return for helping sell the $32 million in new;debt, the firms investment banker charges a fee of 150 basis points (where basis point is;0.01 percent). If Faraway decides to adjust for these flotation costs by adding them to the;initial outlay, what will the initial outlay for the project be?;a. The flotation cost adjusted initial outlay is $_____. (Round to the nearest dollar)

Paper#28745 | Written in 18-Jul-2015

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