1. The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 16%, its before-tax cost of debt is 10%, and its marginal tax rate is 40%. Assume that the firm's long-term debt sells at par value. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1,142. The firm has 576 shares of common stock outstanding that sell for $4.00 per share.

Calculate Paulson's WACC using market-value weights. Round your answer to two decimal places. Do not round your intermediate calculations.

Assets			Liabilities And Equity
Cash	$ 120		Accounts payable and accruals	$ 10
Accounts receivable	240		Short-term debt	42
Inventories	360		Long-term debt	$1,100
Plant and equipment, net	2,160		Common equity	1,728
Total assets	$2,880		Total liabilities and equity	$2,880

2. Ford Enterprises stock is currently selling for $25.67 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project the firms growth rate to be constant at 7.27%. Using the cost of equity using the discounted cash flow (or dividend growth) approach, what is Fords cost of internal equity?

a. 22.17%

b. 16.42%

c. 17.24%

d. 15.60%

3. White Lion Homebuilders is considering investing in a one-year project that requires an initial investment of $450,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $550,000. The rate of return that White Lion expects to earn on its project (net of its flotation costs) is

(rounded to two decimal places)

4. Alpha Moose Transporters has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The companys earnings and dividends growth rate are expected to grow at the constant rate of 9.40% into the foreseeable future. If Alpha Moose expects to incur flotation costs of 3.750% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be?

5. Turnbull Co. has a target capital structure of 45% debt, 4% preferred stock, and 51% common equity. It has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%.

If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.7%. However, if it is necessary to raise new common equity, it will carry a cost of 16.8%.

If its current tax rate is 40%, how much higher will Turnbulls weighted average cost of capital (WACC) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings? (Note: Round your intermediate calculations to two decimal places.)

a. 1.39%

b. 0.91%

c. 1.07%

d. 1.28%

6. Kuhn does not have any retained earnings available to finance this project, so the firm will have to issue new common stock to help fund it. Its common stock is currently selling for $22.35 per share, and it is expected to pay a dividend of $1.36 at the end of next year. Flotation costs will represent 3% of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of 8.7%, and they face a tax rate of 40%. What will be the WACC for this project? (Note: Round your intermediate calculations to two decimal places.)