KSS has $1000 par value bonds with an 8% coupon rate and coupons paid annually that mature in 20 years. The bonds are selling for $1,100. KSS has an average tax rate of 30%. KSS is in the 40% marginal tax bracket. What is the before tax cost of debt?

	3.53%
	7.05%

	4.23%
	4.94%

KSS has $1000 par value bonds with an 8% coupon rate and coupons paid annually that mature in 20 years. The bonds are selling for $1,100. KSS has an average tax rate of 30%. KSS is in the 40% marginal tax bracket. What is the after tax cost of debt?

	3.53%
	4.23%

	7.05%
	4.94%

KSS has some $100 par preferred stock with a 6% dividend. The preferred stock sells for $94 on the market. What is the cost of preferred stock?

	6.00%
	6.38%

	94.00%
	88.68%

KSS common stock has a beta of 1.2. The market long term expected return is 12% and the risk free rate is 3%. What is the cost of retained earnings?

	10.8%
	14.4%

	17.4%
	13.8%

CIS common stock currently pays a dividend of $1 per share and trades for $25 per share. New shares can be issued with a $2 per share floatation cost CIS is expected to grow at 8%. What is the cost of a new stock issue?

	4.7%
	8.0%

	12.7%
	12.3%

KSS corporation uses 20% debt, 10% preferred stock, and 70% equity to finance new capital expenditures. The after tax cost of debt is 6%, the cost of preferred stock is 9%, the cost of retained earnings is 12% and the cost of a new stock issue is 14%. What is the WACC if retained earnings are used?

	8.4%
	11.9%

	9.8%
	10.5%

KSS corporation uses 20% debt, 10% preferred stock, and 70% equity to finance new capital expenditures. The after tax cost of debt is 6%, the cost of preferred stock is 9%, the cost of retained earnings is 12% and the cost of a new stock issue is 14%. What is the WACC if a new stock issue is needed?

	9.8%
	8.4%

	10.5%
	11.9%

Which of the following is true?

	As floatation costs increase the WACC decreases
	As the marginal tax rate increases the WACC increases

	As floatation costs increase cost of a new stock issue decreases
	As the marginal tax rate increases the after tax cost of debt decreases

Which of the following is true?

	As the dividend on preferred stock increases the cost of preferred stock decreases
	As the market price of preferred stock increases the cost of preferred stock increases

	As beta increases the cost of equity increases
	As the growth rate increases the cost of equity decreases

Which of the following is true?

	WACC is higher when retained earnings are used compared to issuing new stock
	Corporate tax rates always favor the use of common equity as a source of financing

	When calculating the WACC, the appropriate weights are the target market value weights
	WACC is calculated by adding the component costs together and dividing by 3