Question
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
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 |
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