1. Jorge Ricard, a fi nancial analyst, is estimating the costs of capital for the Zeale

Corporation. In the process of this estimation, Ricard has estimated the before-tax costs of capital for Zeales debt and equity as 4 percent and 6 percent, respectively. What are the after-tax costs of debt and equity if Zeales marginal tax rate is

1. 20 percent?

2. 45 percent?

2. ABC, Inc. has one class of preferred stock outstanding, a $3.75 cumulative preferred stock, for which there are 546,024 shares outstanding.15 If the price of this stock is $72, what is the estimate of ABCs cost of preferred equity?

3. Valence Industries wants to know its cost of equity. Its chief financial officer (CFO)believes the risk-free rate is 5 percent, equity risk premium is 7 percent, and Valences equity beta is 1.5. What is Valences cost of equity using the CAPM approach?

4. Suppose a company has a current dividend of $ 2 per share, a current price of $ 40 per share, and an expected growth rate of 5 percent. Find the cost of equity?

5. DBC is estimating its WACC. The company has collected the following information:

Its capital structure consists of 40 percent debt and 60 percent common equity.

The company has 20-year bonds outstanding with a 9 percent annual coupon that are trading at par.

The companys tax rate is 40 percent.

The risk-free rate is 5.5 percent.

The market risk premium is 5 percent.

The stocks beta is 1.4.

What is the companys WACC?