1. Use the followings data for both Problem 1 and Problem 2. Power Cable Company wants you to calculate its cost of common stock. During the next 12 months, the company will pay dividends (D₁) of $3.50 per share, and the current price of its common stock is $75 per share. The expected growth rate is 7 percent. Flotation costs are $2. Compute the cost of retained earnings (K_e).

2. Use the data in problem 1 to compute the cost of new common stock.

3. Sullivan Cement Company can issue debt yielding 15%. The company is paying a 33% tax rate. What is the after-tax cost of debt?

4. Superior Company has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest payment of $74 and is currently selling for $925. Compute the yield to maturity.