1. Stratun company has 5,000 bonds outstanding with a $1,000 par-value per bond selling for $1,200 each, 100,000 shares of common stock with a market price of $41, and 1,000 shares of $100 par value preferred stock selling at par. What is the weight attached to debt?

a. 49.02%

b 40.20%

c. 58.82%

d. 50.00%

e. Cannot be determined without the tax rate

2. Throwing Inc. has 10,000 bonds with a $1,000 par-value and a total market value of $ 12,450,000. The bonds have an annual coupon of $85.00 and have 14 years to maturity. Assuming a 34% tax rate, what is the after-tax cost of debt?

a. 5.89%

b. 3.88%

c. 4.20%

d. 2.59%

e. 4.88%