a. 1. Calculate the after-tax cost of preferred stock for Ohio Valley Power Company, which is planning to sell $100 million of $3.25 cumulative preferred stock to the public at a price of $25 per share. Flotation costs are $1.00 per share. Ohio Valley has a marginal income tax rate of 40%. 13.0% b. 7.8% c. 8.12% d. 13.54% 2. The Allegheny Valley Power Company common stock has a beta of 0.80. If the current risk-free rate is 6.5% and the expected return on the stock market as a whole is 16%, determine the cost of equity capital for the firm (using the CAPM). 14.1% b. 7.6% c. 6.5% d. 13.0% 3. Easy Slider Inc. sold a 15 year $1,000 face value bond with a 10 percent coupon rate. Interest is paid annually. After flotation costs, Easy Slider received $928 per bond. Compute the after-tax cost of debt for these bonds if the firm's marginal tax rate is 40 percent. 6.0% b. 7.2% c. 7.8% d. 6.6% a. a. 4. Feldspar Inc. is considering the capital structure for a new division, Management has been given the following cost information: Debt/assets .30 .40 .50 .60 .70 kd .10 . 105 11 .117 .13 k . 125 .13 .135 .142 . 155 a. Based on this information, what capital structure (debt/asset ratio) should management accept? Assume the marginal tax rate is 40%. 40% has lowest cost of capital b. 50% has lowest cost of capital 60% has lowest cost of capital d. 70% has lowest cost of capital c