1. Using the cost of debt approximation formula, determine the pretax cost for a bond that sells for $925 off par and pays a coupon of $85 for 20 years. Issue costs (flotation costs) are $5 per bond. You must show the computations to receive points for your answer.

2. For the case in problem 1, calculate the after-tax cost of debt if the company's tax liability is 40%. You must show the computations to receive points for your answer.

3. Consider issuing preferred stock with an annual dividend of $12.00 per preferred share. These shares will sell for $100 each. The issue cost (flotation cost) is $8 per share. Calculate the preferred cost of capital. You must show the computations to receive points for your answer.

4. DupT Corporation plans to make a common stock issue to finance its next capital investment project. The market price of the corporation's stock is $75 per share. A dividend of $5 per share is expected to be paid at the end of the year. The corporation has had an average annual growth of 6%. The issue cost is $2.50 per share. Determine the cost of equity capital using Gordon's constant growth method (Gordon Growth Model). You will need to show the computations to receive credit for your answer.