Doug has been approached by his broker to purchase a $1,000 bond for $795. He believes the bond should yield 8%. The bond pays a 5% annual coupon rate and has 10 years left until maturity. What should Doug's analysis of the bond indicate to him? Use annual analysis. A) The bond is overvalued; he should purchase it. B) The bond is undervalued; he should purchase it. C) The bond is overvalued; he should not purchase it. D) The bond is undervalued, he should not purchase it. The coupon rate on a debt issue is 6%. If the yield to maturity on the debt is 9%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 34%? A) 4.08% B) 7.92% C) 5.94% D) 3.96% Lewis, Schultz, and Nobel Development Corp. has an after-tax cost of debt of 4.5%. With a tax rate of 30%, what is the yield on the debt? A) 9.0% B) 6.43% C) 4.5% D) 1.89% Firm X has a tax rate of 30%. The price of its new preferred stock is $75 and its flotation cost is $3.15. The cost of new preferred stock is 8%. What is the firm's dividend? A) $4.03 B) $7.56 C) $5.75 D) $7.18 Ten years ago, Stigler Company issued $100 par value preferred stock yielding 6%. The preferred stock is now selling for $102 per share. What is the approximate current yield or cost of the preferred stock? (Disregard flotation costs.) A) 8% B) 7.76% C) 5.9% D) There is not enough information to answer the question. Given an optimal capital structure that is 50% debt and 50% common stock, calculate the weighted average cost of capital for the company given the following additional information: A) More than 8%. B) More than 6% and less than 7%. C) More than 7% and less than 8%. D) Less than 6%