iven the following debt information for Huntington Power Co., find the after-tax cost of debt. Assume the companys tax rate is 35 percent.

Debt: 5 percent annual coupon paid semiannually, $1,000 par value, 20 years to maturity, current market price of the bond is $1,080, floatation cost is $10 per bond.

	a.	2.90%
	b.	4.22%
	c.	4.69%
	d.	3.61%

Assuming a selling price of $1,500 per unit, a variable cost of $600 per unit and fixed costs each year is 500,000. Calculate the DOL at the sales level of 1000 units.

	a.	6.00
	b.	4.75
	c.	2.25
	d.	3.50

A proposed project has zero fixed costs. The OCF at 400 units is $15,000. What is the DOL at this sales level and what will happen to OCF if unit sales increase by 10 percent?

	a.	1, OCF will increase by 10%
	b.	0, OCF will not change
	c.	1, OCF will not change
	d.	2, OCF will increase by 20%

Huntington Power Co. has issued following three securities as its long-term source of capital. Calculate the weights of each source of capital (kd, kp, ke).

Debt: 2,500 bonds outstanding, current market price of the bond is $1,080.

Preferred Stock: 3,000 shares outstanding, selling for $98.

Common Stock: 60,000 shares outstanding, selling for $55 per share.

	a.	42.90%; 4.67%; 52.43%
	b.	45.63%; 1.72%; 59.67%
	c.	42.90%; 2.23%; 52.14%
	d.	42.90%; 4.67%; 55.71%
	e.	59.67%; 5.08%; 35.24%
	f.	45.63%; 1.72%; 52.65%

_______________ represent the proportions of debt, preferred stocks, and common equity in its total capital used by the firm in financing the firm's assets.

	a.	Costs of capital
	b.	Capital structure weights
	c.	Operating leverage
	d.	Financial leverage

Suppose that your firm has a cost of equity of 10%, cost of preferred stock of 8%, and an after-tax cost of debt of 6%. If the firm has 30% in debt, 5% in preferred stock, and 65% in equity, what is the firm's weighted average cost of capital (WACC)? Tax rate is 20%.

	a.	10.9%
	b.	7.5%
	c.	11.4%
	d.	8.7%