1.To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity.This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000.If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?

a. 4.35% b. 4.58% c. 4.83% d. 5.08% e. 5.33%

2. Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually.The bond currently sells for $925 and the company's tax rate is 40%.What is the component cost of debt for use in the WACC calculation?

a. 4.28% b. 4.46% c. 4.65% d. 4.83% e. 5.03%

3. Assume that Kish Inc. hired you as a consultant to help estimate its cost of common equity.You have obtained the following data:D0 = $0.90; P0 = $27.50; and g = 7.00% (constant).Based on the DCF approach, what is the cost of common from retained earnings?

a.9.29% b.9.68% c. 10.08% d. 10.50% e. 10.92%

4. Rivoli Inc. hired you as a consultant to help estimate its cost of common equity.You have been provided with the following data:D0 = $0.80; P0 = $22.50; and g = 8.00% (constant).Based on the DCF approach, what is the cost of common from retained earnings?

a. 10.69% b. 11.25% c. 11.84% d. 12.43% e. 13.05%

5. Weaver Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share.New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred.What would be the cost of equity from new common stock?

a. 12.70% b. 13.37% c. 14.04% d. 14.74% e. 15.48%