4.

6.

a.

b.

c.

d.

7.

Project A.

Project B.

Project C

10.

(Cost of debt) The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1,000 par value bonds at a net price of $925. The coupon interest rate is 12 percent, and the bonds would mature in 18 years. If the company is in a 40 percent tax bracket, what is the after-tax cost of capital to Zephyr for bonds? The after-tax cost of capital to Zephyr for bonds is %. (Round to two decimal places.) (Individual or component costs of capital) Compute the costs for the following sources of financing: a. A \$1,000 par value bond with a market price of \$965 and a coupon interest rate of 11 percent. Flotation costs for a new issue would be approximately 7 percent. The bonds mature in 7 years and the corporate tax rate is 21 percent. b. A preferred stock selling for $106 with an annual dividend payment of $7. The flotation cost will be $6 per share. The company's marginal tax rate is 21 percent. c. Retained earnings totaling $4.8 million. The price of the common stock is $66 per share, and dividend per share was $8.65 last year. The dividend is not expected to change in the future. d. New common stock for which the most recent dividend was $2.97. The company's dividends per share should continue to increase at a growth rate of 8 percent into the indefinite future. The market price of the stock is currently $56; however, flotation costs of $7 per share are expected if the new stock is issued. a. What is the firm's after-tax cost of debt on the bond? \% (Round to two decimal places.) (Payback period calculations) You are considering three independent projects: project A, project B, and project C. Given the free cash flow information in the popup window, . calculate the payback period for each. If you require a 3-year payback before an investment can be accepted, which project(s) would be accepted? What is the payback period of project A? years (Round to two decimal places.) (Payback period calculations) You are considering three independent projects: project A, project B, and project C. Given the free cash flow information in the popup window, . calculate the payback period for each. If you require a 3-year payback before an investment can be accepted, which project(s) would be accepted? What is the payback period of project A? years (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) (Discounted payback period) Assuming an appropriate discount rate of 13 percent, what is the discounted payback period on a project with an initial outlay of $100,000 and the following free cash flows? Year 1=$30,000 Year 2=$25,000 Year 3=$20,000 Year 4=$40,000 Year 5=$20,000 Year 6=$40,000 (Click on the following icon in order to copy its contents into a spreadsheet.) The project's discounted payback period is years. (Round to two decimal places.)