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Part 4 The Capital Budgeting Process he 13. Wallace Container Company issued $100 par value preferred stock 12 years ago. The stock provided a 9 percent yield at the time of issue. The preferred stock is now selling for $72. What is the current yield or cost of the preferred stock? (Disregard flotation costs.) 14. The treasurer of BioScience, Inc., is asked to compute the cost of fixed income securities for her corporation. Even before making the calculations, she assumes the aftertax cost of debt is at least 2 percent less than that for preferred stock. Based on the following facts, is she correct? Debt can be issued at a yield of 11 percent, and the corporate tax rate is 30 percent. Preferred stock will be priced at $50 and pays a dividend of $4.80. The flotation cost on the preferred stock is $2.10. 15.) Murray Motor Company wants you to calculate its cost of common stock. Dur- ing the next 12 months, the company expects to pay dividends (D) of $2.50 per share, and the current price of its common stock is $50 per share. The expected growth rate is 8 percent. a. Compute the cost of retained earnings (K). Use Formula 11-6 on page 338. b, If a $3 flotation cost is involved, compute the cost of new common stock (K.). Use Formula 11-7 on page 339. 16. Compute K, and K, under the following circumstances: a. D = $4.20, P. = $55, g = 5%, F = $3.80. b. D = $0.40, P. = $15, g = 8%, F = $1. c. E, earnings at the end of period one) = $8, payout ratio equals 25 percent, Po = $32, g = 5%, F = $2. d. D. (dividend at the beginning of the first period) = $3, growth rate for divi dends and earnings (g) = 9%, Po = $60, F = $3.50. > 17. Business has been good for Keystone Control Systems, as indicated by the four- year growth in earnings per share. The earnings have grown from $1.00 to $1.63 a. Use Appendix A at the back of the text to determine the compound annual