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a) Z CORP can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the company's cost of prefered stock rps?
d) Z CORP plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70. Z CORP must pay flotation costs of 5% of the issue price. What is the cost of the preferred stock?
e) Z's common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $300 a share at the end of the year (Di =$300), and the dividend is expected to grow at a constant rate of 5% a year.What is its cost of common equity?
f) Z book stores has a beta of 0.8. The yield on a 3-month T-bill is 4%, and the yield on a 10-year. T-BOND IS 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity.using the CAPM?
g) TSI IMPORTERS's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. TSI's tax rate is 40%, rd=6%, rps=5.8 %, and rs =12%. If TSI has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? h) ORTIZ MOTORS has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding bond is 9%, and the company's tax rate is 40%. ORTIZ'S CFO has calculated the company's WACC as 9.96%. What is the company's cost of equity capital?
i) A company's 6% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $515.16. The company's federal-plus-state rate is 40%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Base your answer on the nominal rate).
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