1) Ivanhoe Comics, Inc., has borrowed $200 million and is required to pay its lenders $14 million in interest this year. If Ivanhoe is in the 30 percent marginal tax bracket, then what is the after-tax cost of debt (in dollars as well as in annual interest percentage) to Ivanhoe? (Round answers to 2 decimal places, e.g. 15.25 or 15.25%.)

In DollarsIn PercentageAfter-tax cost of debt$

milliion

%

2) Crane Tire Co. just paid an annual dividend of $1.20 on its common shares. If Crane is expected to increase its annual dividend by 2.10 percent per year into the foreseeable future and the current price of Crane's common shares is $15.09, what is the cost of common stock for Crane? (Round intermediate calculations to 4 decimal places, e.g. 0.1555 and final answer to 2 decimal places, e.g. 15.25%.)

Cost of common stock

%

3) Cullumber Co. has a capital structure, based on current market values, that consists of 40 percent debt, 10 percent preferred stock, and 50 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Cullumber's after-tax WACC? Assume that the firm's marginal tax rate is 40 percent. (Round final answer to 2 decimal places, e.g. 15.25%.)

After tax WACC

%

4) Cullumber Co. has a capital structure, based on current market values, that consists of 40 percent debt, 10 percent preferred stock, and 50 percent common stock. If the returns required by investors are 11 percent, 11 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Cullumber's after-tax WACC? Assume that the firm's marginal tax rate is 40 percent. (Round final answer to 2 decimal places, e.g. 15.25%.)

After tax WACC

%

5) Sunland's T-Shirts, Inc., has debt claims of $380 (market value) and equity claims of $620 (market value). If the after-tax cost of debt financing is 7 percent and the cost of equity is 13 percent, what is Sunland's weighted average cost of capital? (Round answer to 2 decimal places, e.g. 15.25%.)

Weighted average cost of capital

%

6) You are analyzing a firm that is financed with 70 percent debt and 30 percent equity. The current cost of debt financing is 11 percent, but due to a recent downgrade by the rating agencies, the firm's cost of debt is expected to increase to 13 percent immediately.

How will this increase change the firm's weighted average cost of capital if you ignore taxes? (Round answer to 2 decimal places, e.g. 15.25%.)

Ignoring taxes firm's weighted average cost of capital will decreaseincrease

by

%.

If you consider taxes and the firm is subject to a 40 percent marginal tax rate? (Round answer to 3 decimal places, e.g. 15.250%.)

Considering taxes firm's weighted average cost of capital will decreaseincrease

by

%.

7) Ivanhoe Wok Co. is expected to pay a dividend of $1.30 one year from today on its common shares. That dividend is expected to increase by 5.00 percent every year thereafter. If the price of Ivanhoe common stock is $10.00, what is the cost of its common equity capital?

Cost of common equity

%