13(1) The Dybvig Corporations common stock has a beta of 1.3. If the risk-free rate is 5.3 percent and the expected return on the market is 11 percent, what is Dybvigs cost of equity capital? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost of equity capital %

13(2)

Advance, 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 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 10 percent annually.

What is Advance's pretax cost of debt? (Do not round intermediate calculations 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

%

13(3)

Shanken Corp. issued a 30-year, 6 percent semiannual bond 4 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 35 percent.

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

Cost of debt

%

b.	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

%

c.

Which is more relevant, the pretax or the aftertax cost of debt?

	Aftertax cost of debt
	Pretax cost of debt

13(4)

Mullineaux Corporation has a target capital structure of 75 percent common stock and 25 percent debt. Its cost of equity is 15 percent, and the cost of debt is 6 percent. The relevant tax rate is 30 percent.

What is Mullineauxs WACC? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

WACC

%

13(5)

Miller Manufacturing has a target debtequity ratio of 0.35. Its cost of equity is 14 percent, and its cost of debt is 5 percent. If the tax rate is 38 percent, what is Millers WACC? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

WACC

%

13(6)

Filer Manufacturing has 4 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value $90 million, has a coupon of 6 percent, and sells for 98 percent of par. The second issue has a face value of $60 million, has a coupon of 7 percent, and sells for 106 percent of par. The first issue matures in 21 years, the second in 3 years.

a.	What are Filer's capital structure weights on a book value basis? (Do not round intermediate calculations and round your final answers to 4 decimal places. (e.g., 32.1616))

Equity / Value
Debt / Value

b.	What are Filer's capital structure weights on a market value basis? (Do not round intermediate calculations and round your final answers to 4 decimal places. (e.g., 32.1616))

Equity / Value
Debt / Value

c.

Which are more relevant?

	Market value
	Book value

13(7)

Corporation Growth has $82,000 in taxable income, and Corporation Income has $8,200,000 in taxable income. Use the tax rates from Table 2.3. (Do not round intermediate calculations.)

a.	What is the tax bill for each firm?

Firms	Tax Bill
Corporation Growth	$
Corporation Income	$

b.	Suppose both firms have identified a new project that will increase taxable income by $10,000. How much in additional taxes will each firm pay?

Firms	Additional taxes
Corporation Growth		$
Corporation Income		$