2.

Oberon, Inc., has a $15 million (face value) 10-year bond issue selling for 99 percent of par that pays an annual coupon of 8.35 percent.

What would be Oberons before-tax component cost of debt? (Round your answer to 2 decimal places.)

Cost of debt

%

5.

OMG Inc. has 5 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 6,000 bonds. Suppose the common shares are selling for $20 per share, the preferred shares are selling for $29 per share, and the bonds are selling for 109 percent of par.

What would be the weight used for equity in the computation of OMGs WACC? (Round your answer to 2 decimal places.)

Weight used

%

6.

OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $28 per share, the preferred shares are selling for $27 per share, and the bonds are selling for 108 percent of par.

What weight should you use for debt in the computation of OMGs WACC? (Round your answer to 2 decimal places.)

Weight used

%

7.

Suppose that B2B, Inc., has a capital structure of 36 percent equity, 16 percent preferred stock, and 48 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 13.5 percent, 9.0 percent, and 8.5 percent, respectively.

What is B2Bs WACC if the firm faces an average tax rate of 30 percent? (Round your answer to 2 decimal places.)

WACC

%

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