Easy Rider Inc. sold a 15 year $1,000 face value bond with a 10 percent coupon rate. Interest is paid annually. After flotation costs, Easy Rider received $928 per bond. Compute the after-tax cost of debt for these bonds if the firm's marginal tax rate is 40 percent. a) 22% b) 11% c) l3% d) 6.6% e) 4.4% Western Airlines is planning to sell $10 million of preferred stock The par value of the preferred is $50 per share. The annual dividend will be 13% (preferred dividends are typically quoted as a percent of par value) The market value of the preferred is $50 per share Issuance costs are expected to be $2 per share Western has a marginal tax rate of 40 percent What is the company's cost of preferred stock? a) 27% b) 13.54% c) 13.00% d) 8.12% e) 7.80% The While Corporation has a capital structure of 60 percent common equity. 10 percent preferred stock, and 30 percent debt This capital structure is believed to be optimal To finance expansion plans over the coming year, the firm expects to have $40 million in retained earnings available The cost of retained earnings is 18 percent Additional common equity can be obtained by selling new common stock at a cost of 19 6 percent Preferred stock can be sold at a cost of 15 percent $25 million in secured bonds can be sold at a pretax cost of 14 percent Beyond S25 million, the firm would have to sell unsecured bonds (debentures) at a pretax cost of 15 percent The firm s marginal tax rate is 40 percent. What is the firm's lowest weighted cost of capital? a) 14 82% b) 16.50% c) 11.94% d) 15.78% e) 15.0%