1.Amiante corporation bonds are currently trading for $980 and make annual payments of $40.The bonds will mature in 20 years at which time they will have a face value of $1,000. What is the component cost of Amiante's debt?

2.Ebeling Inc. has a perpetual preferred stock dividend of 0.55 per quarter and its current stock price is 91. What is its component cost of preferred stock?

3.The US government T-bill has a yield of 0.03, the Wilshire 5000 is expected to yield 0.08, and a stock's beta is 0.8.If inflation is expected to increase by 0.01 next year, but everything else remains the same, what will the new cost of retained earnings be?

4.Emphyrio Inc. wishes to issue new stock to finance an aggressive expansion. Lord investment bank charges a flotation cost of 0.13 as a fraction of each stock sold.Emphyrio's current stock price is 73, and it expects to pay a dividend of 0.64 at the end of the year.What is Emphyrio's component cost of a new equity issue?

5.Rank the following from highest to lowest for the typical company.

Question 5 options:

rd(1-Tc), the after tax cost of debt

rs, the cost of retained earnings

re, the cost of a new equity issue

WACC, the Weighted Average Cost of Capital