Interest rate., 6%; tAx fale, JU 92 IR Ol Rigs' currently outstanding 13% coupon bonds have a yield to maturity of 9.55, IR Aherlox Cost of Debf believes it could issue at par new bonds that would provide a similar yield to maturity. tr its marginal tax rate is 30%, what is IR's after-tax cost of debt? Long Haul Trucking can issue perpetual preferred stock at a price of S$25 a share. The issue 9-3 is expected to pay a constant annual dividend of $1.75 a share. Ignoring flotation costs, what is the company's cost of preferred stock, r? Cost of Prefemed Stock Burnwood Tech plans to issue some $25 par preferred stock with a 6% dividend. The stock is selling on the market for $27.00, and Burnwood must pay flotation costs of 4% of the market price. What is the cost of the preferred stock? 9-4 Cost al Plarred Srock with Flatotion Costs Summerdahl Resorts' common stock is currently trading at $36 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year, and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? 9-5 Cost of Equity DCF 9-6 Booher Book Stores has a beta of 0.8. The vield on a 3-month T-bill is 4% and the vield on a 10-year government bond is 6%. The market risk premium is 5.5%, but the stock market return in the previous years was 15%. What is the estimated cost of common equity using the CAPM? Cost of Equity CAPM 9-7 Shi Importers balance sheet shows $300 million in debt, $50 million in preferred stock, and WACC $250 million in total common equity. Shi faces a 30% tax rate and the following data: r=6 1-5.8%, and r, -12 %. If Shi has a target capital structure of 30% debt, 5 % preferred stock and 65% common stock, what is Shi's WACC? 9.35 9-4 Ridgeway Motors has a target capital structure of 30% debt and 70% equity. The yield to WACC maturity on the company's outstanding bonds is 8%, and the company's tax rate is 30%. Ridgeway's CFO has calculated the company's WACC as 9.38%, What is the company's cost rmediat of equity capital? Problems 9-15 9-4 A