1. A firm offers a 15-year maturity bond with $1,000.00 face value and 6% coupon rate. The current market price for the bond is $998.00. Selling the bonds costs the firm $60.00 per share. What is the after-tax cost of this debt, assuming a 34% corporate tax?

a. 6.60%

b. 8.12%

c. 4.40%

d. 31.73%

2.A preferred stock pays 3% on its par value of $200.00, and the required rate of return is 9%. What is the dividend?

a.$6.00

b. $60.00

c. $1.80

d. $18.00

3.A firm is considering a $300,000 debt issue. Their corporate tax rate is 34%. This long-term issue will pay a coupon rate of 5.6%. What is the after-tax cost of this debt?

a. 32%

b. 37%

c. 1.56%

d. 3.67%

4. A stock paid $3.17 in dividends at the end of last year and is expected to pay a cash dividend until infinity. No growth is expected. Investors require a 6% rate of return. What is the value of the common stock?

a. 5.282

b. 56

c. 3.17

d. 52.83

5.What is the weighted average cost of capital and its purpose?

a. It combines the individual component costs of capital into a single number that helps with project evaluation.

b. It is the proportion of all sources of financing used by the firm that helps with prioritizing projects.

c. It is the mix of long-term sources of funds used by the firm that helps with prioritizing projects.

d. It divides a value into individual component costs of capital and the values help with project evaluation.

6. A common stock paid a dividend of $4.25 this year. It is expected to grow at 12% each year for all future years. Investors require a 15% return rate. What is the value of a share of this stock?

a. $3.45

b. $162.92

c. $158.67

d. $141.67

7.The current dividend for a corporation is $3.73. The dividend is expected to increase by 12%, and it is expected to continue that rate of growth for the foreseeable future. Given that their stock is trading at $38.00 per share and that it costs $3.37 per share to issue new common stock, what is the cost of new common equity capital?

a. 10.77%

b. 24.06%

c. 22.77%

d. 10.99%

8. A firm has $76,000,000 in debt, which accounts for 43% of their total funds raised; the after-tax cost of these funds is 6.10%. The same firm has $100 million in common stock, which accounts for 57% of their total funds raised; their after-tax costs (including transaction costs) are 15.7%. What is the weighted average cost of capital for these funds?

a. 10.21%

b. 8.92%

c. 2.63%

d. 11.55%

9. A firm issued $15 million in preferred stock at a price of $3.25 per share. The preferred shares carry a 13% dividend, or $0.42 annually. After paying fees and costs, the firm realizes $2.89 per share issued. What is the cost of capital for this issuance of preferred stock?

a. 8.5%

b. 36%

c. 1.12%

d. 14.6%