5.a.

1.b

1.c

1.d

Assume that Toll Industries currently has no leverage in its capital structure. The firm has an equity cost of capital of 15%. Toll is thinking about borrowing money at a cost of 5% to repurchase its own stock in the stock market. Assume perfect capital markets. If Toll borrowed up to the point where its debt-to-firm value ratio became 30%, then the levered cost of equity of Toll would be closest to: 8.04% 9.27% 15.27% 19.29% None of the above Consider a company that issued $150 million in permanent debt (at par) that has an annual coupon rate of 5%. The company is going to pay only interest on this debt. Assume a corporate tax rate of 20% for the company. The present value of the company's annual interest tax shield is closest to: $1.5 million $15 million $30 million $50 million None of the above Wayne Enterprises is currently an all-equity firm with an equity cost of capital of 14%. Suppose that Wayne is planning to add leverage to its capital structure and has a target debt-to-equity ratio of 0.5. Assume a cost of debt of 6% for Wayne and a corporate tax rate of 20%. Further assume that Wayne's pre-tax WACC remains the same. The firm's after-tax WACC is then closest to: 13.6% 14.5% 15.4% 16.0% None of the above Fitzroy Ltd. is a firm with 30 million shares outstanding and a corporate tax rate of 30%. Fitzroy has just announced that it will give $50 million that it has in excess cash to its shareholders via a special cash dividend. However, its shareholders always thought that the company would keep this excess cash forever. The change in Fitzroy's stock price as a result of this announcement is closest to: $0.30 $0.50 $0.80 $1.10 None of the above