12-3 A corporation has an outstanding bond with the following characteristics:

Coupon interest rate 6%

Interest payments semiannually

Face value $1,000

Years to maturity 8

Current market value $902.81

What is the yield to maturity (YTM) for this bond?

12-5 Hybrid Hydro Plants Inc, which has a marginal tax rate equal to 34 percent has preferred stock that pays a constant dividend equal to $15 per share. The stock currently sells for $125. If the company incurs a 3 percent flotation cost each time it issues preferred stock, what is the cost of issuing preferred stock?

12-6 The common stock of Omega Corporation is currently selling for $50 per share. It is expected that Omega will pay a dividend equal to $2 per share this year. In addition, analysts have indicated that the company has been growing at a constant rate of 5 percent, and this growth is expected to continue forever. What is Omegas cost of retained earnings?

12-7 Analysts of the ICM Corporation have indicated that the company is expected to grow at a 5 percent rate for as long as it is in business. Currently the ICMs stock is selling for $70 per share. The most recent dividend paid by the company was $5.60 per share. If ICM issues new common stock it will incur flotation costs equal to 7 percent. If ICMs marginal tax rate is 35 percent, what is its cost of retained earningsthat is, its internal equity? What is its cost of new equity?

12-9 The following information pertains to the common equity of Funtastic Furniture Co:

Current selling price - $68.00

Constant growth rate - 8.0%

Most recently paid dividend - $3.50

Flotation costs - 10%

Marginal tax rate - 40%

What is the company's cost of retained earnings? What is the company's cost of new common stock?

12-11 Chicago Paints Corporation has a target capital structure of 40 percent debt and 60 percent common equity. The company expects to have $600 of after-tax income during the coming year, and it plans to retain 30 percent of its earnings. The current stock price is Po = $30, the last dividend paid was Do = $2.00, and the dividend is expected to grow at a constant rate of 7 percent. New stock can be sold at a flotation cost of F = 25%. What will Chicago Paints' marginal cost of equity capital be if it raises a total of $500 of new capital?