1. A company is financed with equity and 10-year bonds that have face value of 1,300 and coupon rate of 5%. If each bond is selling for 956.71 today, the company's cost of debt is:

2. If the Bank of Palestine raises interest rate, the cost of debt for a company that is financed with fixed-coupon long-term bonds will

Select one:

a. Decrease

b. Increase and Decrease

c. Increase

d. Stay the same

3. The XY firms common stock is currently selling for $78 per share. The firm expects to pay cash dividends of $8 per share next year. The firms dividends have been growing at an annual rate of 9%, and this is expected to continue into the future. The stock must be underpriced by $4 per share, and flotation costs are expected to amount to $2 per share. The firm can sell an unlimited amount of new common stock under these terms. Calculate Cost of new common stock?

Select one:

a. 20.11%

b. 10.26%

c. 11.25%

d. 22

4. XY Company is expected to pay an annual dividend of $0.95 a share next year. The market price of the stock is $55 and the growth rate is 5 percent. What is the firm's cost of equity?

Select one:

a. 6.72%

b. 8.57%

c. 9%

d. 6%