A firm has publicly traded common stock with a current market price of $100 per share. The firm just recently paid a $5.24 annual dividend and just 4 years ago paid a $4.00 annual dividend on its outstanding common stock. The firm is about to issue new common stock at an offer price of $98 per share and will incur flotation costs of $1 per share. The cost of capital for this new issue of common stock is ________.

5.8%

7.7%

10.8%

12.8%

Lewis corporation receives net proceeds of $960 by issuing a 30-year bond with a $1,000 par value and 7.5% semi-annual coupon payment. If Lewis has a 21% tax rate, what are the before-tax and after-tax cost of debt?

7.76%; 6.13%

8.13%; 6.41%

7.85%; 6.20%

8.03%; 6.33%

Hardy corporation has decided to issue new common stock. The last dividend paid was $6 and its expected that dividends will grow at 5% forever. The current stock price is $60 and Hardy expects to sell new shares for $55. If the floatation cost is $3 per share, what is the cost of Hardys new common stock.

16.54%

12.12%

17.12%

16.45%

Terry Corporation uses debt, preferred stock, and common stock to raise capital. The firms capital structure consists of the following proportions: 35 % debt; 10% preferred stock; and 55% common stock. Terrys before-tax cost of debt is 6.4%, cost of preferred stock is 8.5%, and cost of common stock is 10.3%. What is Terrys WACC?

8.28%

8.43%

7.95%

8.76%

Rachael Ellis is taking out a 20-year $150,000 mortgage to buy a new house. She will make monthly payments of $1,299.20 and be able to deduct her interest expenses from her taxable income. If Rachael is in the 24% tax bracket, what are her before-tax and after-tax interest rates?

7.89% and 6%

7.56% and 5.75%

8.47% and 6.44%

8.32% and 6.32%