Question
6. A corporation wishes to calculate its cost of common stock equity, by using the CAPM, The firm's i internal expert indicate that the risk-free
6. A corporation wishes to calculate its cost of common stock equity, by using the CAPM, The firm's i internal expert indicate that the risk-free rate equals 8% and beta equals 2%. and the market return equals 12%. What is the cost of common stock? Please show work.
7. Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 8% coupon rate. Because current market rates for similar bonds are just under 8%, Warren can sell its bonds for $1,020 each; Warren will incur flotation costs of $31 per bond. The firm is in the 20% tax bracket. a. Find the net proceeds from the sale of the bond, Nd. b. Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt. c. Use the approximation formula to estimate the before-tax and after-tax costs of deb
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