1. Cost of debt with fees.

Kenny Enterprises will issue a bond with a par value of $1,000, a maturity of twenty years, and a coupon rate of 10.6% with semiannual payments, and will use an investment bank that charges $25 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market prices?

a. $972.19

b. $1,012.77

c. $1,064.97

d.$1,127.50

2. Adjusted WACC.

Clark Explorers, Inc., an engineering firm, has the following capital structure:

	Equity	Preferred Stock	Debt
Market Price	$77.08	$101.74	$914.14
Outstanding units	109,000	12,000	5,232
Book value	$2,511,000	$1,130,000	$5,232,000
Cost of capital	17.04%	12.36%	10.3%

Using market value and book value (separately, of course), find the adjusted WACC for Clark Explorers at the following tax rates:

a. 35%

b. 30%

c. 15%

d. 10%