multiple choice questions on Cost of capital

all cald EN REL ected beta s the Common stock (10 million shares outstanding) C100 million ently at a uity The bonds pay interest annually and are selling at C1.075.82 to yield 10%. Preferred stock is selling for C38.50 a share and the common stock is selling for C12.00 a share. The beta of the stock is 1.15. The relevant treasury security rate is 5%, and the market is expected to return 14% next year. MUCG pays hat per taxes at a rate of 39%. Calculate MUCG'S: re. i. ii. After tax cost of common stock After tax cost of preferred stock After tax cost of debt is iii. in 15 years and pays interest semi- Bonds (12% coupon, C1.000 face value. 5 years to maturity) C60 million Preferred stock (C5 dividend, 1 million shares outstanding) C10 million 9. You have been given the following information: the market price of company Ais C200 million and that of B is C100 million. The number of shares of company A is million and that of B is 500,000. Merging the two firms will allow for cost savings with a present value of 25 million. Firm A has decided to pay 65 million to acquire B. a. What is the market value of A? b. What is the market value of B? c. What is the gains from synergies? d. Compute the cost of merger to firm A. e. What is the benefit of the merger to B? f. What is the NPV of the merger? 10. Kunla Ltd. and Gunta Inc. decided to merge. The following were observed just before the merger announcement