Chapter 9& Chapter 14 Homework Homework Problems: (1) Company BW has issued 2,000 corporate bonds with a maturity value of $1,000 and a couple rate of 6%. Coupon payments are made every 6 month and those bonds will mature in 6 months from today. Current market price of those bonds is $978.56. Marginal corporate income tax rate is 34%, find the annual after-tax cost of debt. [20 points] **HINT: What have you found? Semi-annual rate or annual rate? (2) Company BW has issued 2,000 preferred stocks. The par value is $100, dividend rate is 8%, and dividend is paid at the end ofeach year. Market price is $85 a share. Find the annual cost of preferred stock. [15 points] (3) Company BW has 5,0000 shares outstanding and the market price is $23 per share. People believe this company is twice as risky as the stock market. Current T-bill rate is 3% and expected stock market return this year is 06. What is BW's annual cost of equity? [15 points] (4) Find the overall (annual) cost of capital for BW (WACC). [25 points] (5) Company BW has the following two investment opportunities (A and B). a) Which project is better, according to NPV? [15 points b) Which project is better, according to Profitability Index? [10 points] Net Cash Flows r Project A Project B 8,000 500 11,500 -6,000 2,500 3,500 3,500 3,000 4