1. Maloney, Inc.'s $1,000 par value preferred stock paid its $100 per share annual dividend on April 4 of the current year. The preferred stock's current market price is $960 a share on the date of the dividend distribution. Maloney's marginal tax rate (combined federal and state) is 40%, and the firm plans to maintain its current capital structure relationship. The component cost of preferred stock to Maloney would be closest to___

2.The theory underlying the cost of capital is primarily concerned with the cost of

A) Long-term funds and old funds.

B) Short-term funds and new funds.

C) Long-term funds and new funds.

D) Short-term funds and old funds.

3.The following financial information is available on the Haverty Company:

Current per share market price $48.00

Most recent per share dividend $3.50

Expected long-term growth rate 5.0%

Haverty can issue new common stock to net the company $44 per share. Determine the cost of equity raised through selling new stock using the dividend growth model approach. (Compute answer to the nearest .1%).

4.Hatter Inc. has the following capital components and costs. Calculate Hatter's WACC.

ComponentValueCost

Debt15,50010% (after tax)

Preferred Stock7,50012%

Common Equity10,00014%

5.Donoho Corp. issued 20-year, $1,000 par bonds eight years ago with a 10% coupon paying semiannually that are now selling for $1,152.47. Estimate the cost of retained earnings assuming investors generally demand a 5% risk premium on equity over the cost of debt.

6.Hi-Tech, Inc. has determined that it can minimize its weighted average cost of capital (WACC) by using a debt-equity ratio of 2/3. If the firm's cost of debt is 9% before taxes, the cost of equity is estimated to be 12% before taxes, and the tax rate is 40%, what is the firm's WACC?