EF G H 1. Westbrook's Painting Co. plans to issue a $1.000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The bond will sell for $1,000 and the company's marginal tax rate is 40.00%, but Congress is considering a change in the corporate tax rate to 30.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted? 3 Number of years to maturity 4 Number of payments per year 5 Annual coupon rate 6 Face value 7 Price 8 Old tax 9 New tax 11 Ta 13 Old AT 15 New AT 16 17 Difference - 19 11-1 11- 2 11-3 2. You have been hired by the CFO of Lugones Industries to help estimate its cost of common equity. You have obtained the following data: (1) rd - yield on the firm's bonds -7.00% and the risk premium over its own debt cost - 4.00%. (2) RF - 5.00% RPM - 6.00%, and b-1.25. (3) D1 - $1.20, PO = $35.00, and g -8.00% (constant). You were asked to estimate the cost of common based on the three most commonly used methods and then to indicate the difference between the highest and lowest of these estimates. What is that difference? 3rd 4 Risk premium 5 Rif 6 RPM 7 b 8 01 9 PO 10 9 13 11 14 12 15 13 17 Difference 11 11- 2 11-3