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help! upcoming deadline and i am having a hard time with these questions! just need answers... thanks so much 9 Problem 11-17 Costs of retained

help! upcoming deadline and i am having a hard time with these questions! just need answers... thanks so much

image text in transcribed 9 Problem 11-17 Costs of retained earnings and new common stock [LO3] Compute Ke and Kn under the following circumstances: a. D1 = $4.60, P0 = $60, g = 6%, F = $3.00. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ke % % Kn b. D1 = $.25, P0 = $20, g = 9%, F = $1.50. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ke Kn % % c. E1 (earnings at the end of period one) = $6, payout ratio equals 30 percent, P0 = $24, g = 4.5%, F = $1.60. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ke Kn % % d. D0 (dividend at the beginning of the first period) = $3, growth rate for dividends and earnings ( g) = 8%,P0 = $50, F = $3. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Ke Kn % % 10 Problem 11-26 Impact of credit ratings on cost of capital [LO3] Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credit rating. The corporate tax rate is 35 percent. Northwest's treasurer is trying to determine the corporation's current weighted average cost of capital in order to assess the profitability of capital budgeting projects. Historically, the corporation's earnings and dividends per share have increased about 4.6 percent annually and this should continue in the future. Northwest's common stock is selling at $69 per share, and the company will pay a $6.20 per share dividend (D1). The company's $106 preferred stock has been yielding 6 percent in the current market. Flotation costs for the company have been estimated by its investment banker to be $4.00 for preferred stock. The company's optimum capital structure is 35 percent debt, 10 percent preferred stock, and 55 percent common equity in the form of retained earnings. Refer to the following table on bond issues for comparative yields on bonds of equal risk to Northwest. Data on Bond Issues Moody's Rating Issue Utilities: Southwest electric power--7 1/4 2023 Pacific bell--7 3/8 2025 Pennsylvania power & light--8 1/2 2022 Industrials: Johnson & Johnson--6 3/4 2023 Dillard's Department Stores--7 3/8 2023 Marriott Corp.--10 2015 Price Yield to Maturity Aa2 Aa3 A2 $ 920.18 896.25 995.66 8.66% 8.44 8.45 Aaa A2 B2 850.24 910.92 1,060.10 8.35% 8.88 9.55 a. Compute the cost of debt, Kd (use the accompanying tablerelate to the utility bond credit rating for yield.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of debt % b. Compute the cost of preferred stock, Kp. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of preferred stock % c. Compute the cost of common equity in the form of retained earnings, Ke. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Cost of common equity % d. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost % Debt (Kd) Preferred stock (Kp) Common equity (Ke) % Weighted average cost of capital (Ka) 11 Problem 11-11 Changing rates and cost of debt [LO3] Terrier Company is in a 35 percent tax bracket and has a bond outstanding that yields 9 percent to maturity. a. What is Terrier's aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Aftertax cost of debt % b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax rate falls to 20 percent. What is Terrier's new aftertax cost of debt? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Aftertax cost of debt % c. Has the aftertax cost of debt gone up or down from part a to part b? It has gone up It has gone down 12 Problem 11-19 Weighted average cost of capital [LO1] Global Technology's capital structure is as follows: Debt Preferred stock Common equity 50% 35 15 The aftertax cost of debt is 6.50 percent; the cost of preferred stock is 10.50 percent; and the cost of common equity (in the form of retained earnings) is 13.50 percent. Calculate the Global Technology's weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost % Debt (Kd) Preferred stock (Kp) Common equity (Ke) Weighted average cost of capital (Ka) % 13 Problem 11-27 Marginal cost of capital [LO5] Delta Corporation has the following capital structure: Cost (aftertax Weight ) s Debt (Kd) Preferre d stock (Kp) Commo n equity (Ke) (retained earnings) Weighted Cost 6.2% 25% 1.55% 5.5 25 1.38 15.5 50 7.75 Weighte d average cost of capital (Ka) 10.68% a. If the firm has $22 million in retained earnings, at what size capital structure will the firm run out of retained earnings? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").) Capital structure size (X) $ million b. The 6.2 percent cost of debt referred to earlier applies only to the first $16 million of debt. After that, the cost of debt will go up. At what size capital structure will there be a change in the cost of debt? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").) Capital structure size (Z) $ million 14 Problem 12-25 MACRS depreciation and cash flow [LO2] Telstar Communications is going to purchase an asset for $480,000 that will produce $230,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12-12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket. Fill in the schedule below for the next four years. (Input all amounts as positive values. Round your answers to the nearest whole dollar amount.) Year 1 Year 2 Year 3 Year 4 Earning s before depreciati on and taxes Depreci ation $ $ $ $ Earning s before taxes $ $ $ $ Earning s after taxes Depreci ation $ $ $ $ Cash flow $ $ $ $ Taxes

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