1)

You are given the following information for Lightning Power Co. Assume the companys tax rate is 40 percent.

Debt:	5,000 7.2 percent coupon bonds outstanding, $1,000 par value, 30 years to maturity, selling for 108 percent of par; the bonds make semiannual payments.
Common stock:	440,000 shares outstanding, selling for $62 per share; the beta is 1.05.
Preferred stock:	22,000 shares of 3 percent preferred stock outstanding, currently selling for $82 per share.
Market:	11 percent market risk premium and 5.20 percent risk-free rate.

2) Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20 years to maturity that is quoted at 109 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually.

What is the companys pretax cost of debt? (Do not round intermediate calculation and round your answer to 2 decimal places. (e.g., 32.16))

Cost of debt

%

If the tax rate is 35 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

Cost of debt

%