Question
A. Corporation's bonds have 15 years to maturity with a coupon rate of 5%. Interest is paid semi-annually. The bonds sold at par value, but
A. Corporation's bonds have 15 years to maturity with a coupon rate of 5%. Interest is paid semi-annually. The bonds sold at par value, but the firm paid flotation costs amounting to 6.5% of par value. The firm has a marginal tax rate of 21%. What is the firm's after-tax cost of debt for these bonds?
B. Suppose you own 10% of Neptune Corporation's 300,000 outstanding common shares. The stock was trading for $135 per share before the firm's executives announced a 50% stock dividend. After the stock dividend, you will own _____ shares worth _____ per share.
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