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Could you answer 1-5 showing the math? 1- A company has 20,000 bonds outstanding with a coupon rate of 6.5%. Each bond has a par
Could you answer 1-5 showing the math?
1- A company has 20,000 bonds outstanding with a coupon rate of 6.5%. Each bond has a par value of $1000 and makes annual payments. If the bonds have 30 years to maturity and are selling at 101% of par, what is the after tax cost of debt? Assume a tax rate of 30%. (4.50%) 2- Suppose a company has 200,000 shares of common stock selling for $45 per share. They have a beta of 1.15 and the market risk premium is 8.5%. If the risk free rate is 3.2%, what is the cost of equity? (12.98%) 3- A company has 120,000 shares of $5.50 preferred stock outstanding. If the stock is selling for $67 per share, what is the cost of preferred stock? (8.21%) 4- Delta Lighting has 30,000 shares of common stock outstanding at a market price of $15 a share. This stock was originally issued at $31 per share. The firm also has a bond issue outstanding with a total face value of $280,000 which is selling for 86 percent of par. The cost of equity is 13 percent while the after tax cost of debt is 6.9 percent. The firm has a beta of 1.48 and a tax rate of 30 percent. What is the weighted average cost of capital? (10.87%) 5- Turner's pharmacy has a rate of equity of 9.5%, a rate of preferred stock of 8.25%, and a rate of debt (before tax) of 7% percent. They have 100,000 bonds outstanding with a face value of $1,000 each, selling for 95% of face value. They also have 2,000,000 shares of common stock outstanding with a current price of $37 a share. There are 45,000 shares of preferred stock outstanding at a market price of $41 a share. The company's tax rate is 32%. What is the weighted average cost of capital for Turner's pharmacy? (6.85%)Step by Step Solution
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