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Fin 500 week 8 homework

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Question;Problem 1;A company issues 15-year, $1,000 par-value bonds, with a coupon rate;of 5%. The bonds are sold for $619.70. The tax rate is 30%. Compute the cost of;debt before taxes and after taxes.;Problem 2;Suppose a;company issues common stock to the public for $25 a share. The expected;dividend is $2.50 per share and the growth in dividends is 8%. If the flotation;cost is 10% of the issue proceeds, compute the cost of external equity, re.;Problem 3;Calculate the cost of preferred stock (rPS);with the given information;Par Value = $200;Current Price =;$208;Flotation Cost =;$16;Annual Dividend =;12% of Par;Problem 4;A;company is investigating the effect on its cost of capital with respect to the;tax rate. Suppose there is a capital structure of 20% debt, 10% preferred;stock, and 70% common stock. The cost of financing with retained earnings isre = 12%, the cost of preferred stock financing isrPS = 7%, and the before-tax cost of debt is rd;= 9%. Calculate the weighted average cost of capital (WACC) given a tax rate of;35%.;Problem 5;You have been hired as a consultant to;help estimate the cost of capital. You;have been provided with the following;data: rRF = 4.10%, RPM;= 5.25%, and b = 1.30. Based on the CAPM;approach, what is the cost of common from retained earnings?;Problem 6;A company is trying to estimate its cost;of capital. The following data is;provided: D1 = $1.45, P0;= $22.50, and g = 6.50% (constant).;Based on the DCF approach, what is the cost of common from retained;earnings?

 

Paper#51261 | Written in 18-Jul-2015

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