1. Suppose Today is January 1, 2010; MAM industries issued a 30 year bond with a 9% annual coupon and a $1,000 face value, payable on January 1, 2030. The bond now sells for $915. Use this bond to determine the firms after-tax cost of debt. Assume a 34% tax rate.

2. Suppose MAM Industries (see Problem 1) also issued a 30-year bond five years ago; it has a $1,000 face value and a 10% coupon. If the bond currently sells for $1,000, what is the after-tax cost of debt capital, as indicated by the market value of this outstanding bond?

3. Suppose five years from now the MAM bond described in the Problem 2 has a market price of $1,100. What is the after-tax cost of the debt capital at that time.

4. MAM Industries just declared a dividend of $3.50 per share on common stock. The current stock price is $25 per share and the dividend is expected to increase at a rate of 4% per year for the foreseeable future. Use the dividend growth model to compute the cost of equity capital.

5. Suppose the market risk premium is 8.5%, the risk-free rate is 7% and MAM Industries has a beta of 1.35. Use the SML to compute the firms cost of equity capital.

6. Assume the debt-equity ratio for MAM is .50. Use the data of Problems 1 through 5 to compute the WACC for MAM Industries.

JUST #6 NEEDED PLEASE.

1) Use this bond to determine the firm's after-tax cost of debt (Assume a 34% rax rate.) (90/YTM)*(1-1/1+YTM)A30)+1000/(1+YTM)A30 9.89%(1-34%) Bond price - Bond price - Before tax cost of debt After tax cost of debt- (Coupon/TM)*(1-1/(1+YTM)An)+Face Value/1+YTM)An 9.89% 6.53% 2) what is the after-tax costs of debt capital, as indicated by the market value of this outstanding bond? Pretax cost of debt- After tax cost 10% 10%(1-34%) 6.60% What is the after-tax cost of debt capital at that time? N 20 FV 1000 PMT-10% of 1000-100 PV--1100 3) (20 yrs remain in 5 yrs from now) 8.91% 5.88% pretax cost - after tax cost- Use the dividend growth model to compute the cost of equity capital. price of sharedividend next year/ (cost of equity - growth rate 25 3.5*1.04/ (cost of equity 0.04) Cost of equity0.14560.04- 4) 18.56% Use the SML to compute the firm's cost of equity capital Cost of capitarisk free rate beta* risk premium 7(1.35*8.5) 5) 18.475% 1) Use this bond to determine the firm's after-tax cost of debt (Assume a 34% rax rate.) (90/YTM)*(1-1/1+YTM)A30)+1000/(1+YTM)A30 9.89%(1-34%) Bond price - Bond price - Before tax cost of debt After tax cost of debt- (Coupon/TM)*(1-1/(1+YTM)An)+Face Value/1+YTM)An 9.89% 6.53% 2) what is the after-tax costs of debt capital, as indicated by the market value of this outstanding bond? Pretax cost of debt- After tax cost 10% 10%(1-34%) 6.60% What is the after-tax cost of debt capital at that time? N 20 FV 1000 PMT-10% of 1000-100 PV--1100 3) (20 yrs remain in 5 yrs from now) 8.91% 5.88% pretax cost - after tax cost- Use the dividend growth model to compute the cost of equity capital. price of sharedividend next year/ (cost of equity - growth rate 25 3.5*1.04/ (cost of equity 0.04) Cost of equity0.14560.04- 4) 18.56% Use the SML to compute the firm's cost of equity capital Cost of capitarisk free rate beta* risk premium 7(1.35*8.5) 5) 18.475%