$4-$ a$.$ A bond that has $$1,000$ par value $($face value$)$ and a contract or coupon interest rate of $11$ percent. A new issue would have a floatation cost of $5$ percent of the $$1,130$ market value. The bonds mature in $6$ years. The firm's average tax rate is $30$ percent and its marginal tax rate is $21$ percent.

b$.$ A new common stock issue that paid a $$1\mathrm{.}50$ dividend last year. The par value of the stock is $$15,$ and earnings per share have grown at a rate of $9$ percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend$-$earnings ratio of $30$ percent. The price of this stock is now $$26,$ but $9$ percent flotation costs are anticipated.

c$.$ Internal common equity when the current market price of the common stock is $$43.$ The expected dividend this coming year should be $$3\mathrm{.}20,$ increasing thereafter at an annual growth rate of $7$ percent. The corporation's tax rate is $21$ percent.

d$.$ A preferred stock paying a dividend of $11$ percent on a $$100$ par value. If a new issue is offered, flotation costs will be $15$ percent of the current price of $$161.$

e$.$ A bond selling to yield $9$ percent after flotation costs, but before adjusting for the marginal corporate tax rate of $21$ tercent. In other words, $9$ percent is the rate that equates the net proceeds from the bond with the present value of the future cash flows $($principal and interest$).$

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b$.$ What is the cost of external common equity?

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c$.$ What is the cost of internal common equity?

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d$.$ What is the cost of capital for the preferred stock?

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e$.$ What is the after$-$tax cost of debt on the bond?

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