Edna Recording Studios, Inc., reported earnings available to common stock of $4200000 last year. From these earnings, the company paid a dividend of $1.26 on each of its 1000000 common shares outstanding. The capital structure of the company includes 40% debt, 10% preferred stock, and 50% common stock. It is taxed at a rate of 40%.

The company can issue $1000-par-value, 10% coupon, 5-year bonds that can be sold for $1200 each. Flotation costs would amount to $25.00 per bond. What is the after tax cost of debt financing?

A.3.52%

B.5.86%

C.10.00%

D.6.99%

Eggs,Inc.reported earnings available to common stock of$4200000last year.From these earnings,the company paid a dividend of$1.26on each of its1000000common shares outstanding.The capital structure of the company includes40%debt,10%preferred stock,and50%common stock.It is taxed at a rate of40%.The market price of the common stock is$40and dividends are expected to grow at a rate of6%for the foreseeable future.The company plans to issue$2.00dividend preferred stock for a market price of$25.00per share.Flotation costs would amount to$3.00per share.In addition,the company will also issue$1000-par-value,10%coupon,5-year bonds that can be sold for$1200each.Flotation costs would amount to$25.00per bond.What is the WACC?

A.9.67%

B.8.09%

C.6.99%

D.7.86%

Lawrence Industries' most recent annual dividend was $1.80 per share (D₀=$1.80), and the firm's required return is 11%. Find the market value of Lawrence's shares when dividends are expected to grow at 8% annually for 3 years, followed by a 0% constant growth from year 4 to infinity.

A.$5.11

B.$20.61

C.$20.19

D.$15.07

Eakins Inc.'s common stock currently sells for $45.00 per share, the company expects to earn $2.75 per share during the current year, its expected payout ratio is 70%, and its expected constant growth rate is 6.00%.New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of common from retained earnings?

A.0.57%

B.0.48%

C.0.37%

D.0.75%