Name: 1) McGill Inc. has just issued 10-year bonds that have a face value of $1,000 with a 12% coupon rate paid annually. The bonds sold for $960, but McGill Inc. had to pay $10 flotation costs as well. McGill Inc. has a 30% tax rate. What is the after tax cost of debt? A) 12.9184% B) 11.1025% C) 9.0429% D) 7.7717% E) 3.8755% Answer: 2) Jiffy Co. expects to pay a dividend of $1.00 per share in one year. The current price of Jiffy common stock is $45 per share. Flotation costs are $2.50 per share when Jiffy issues new stock. Jiffy Co.'s long- term growth in dividends is projected to be 5.5 percent per annum indefinitely? a. What is the cost of internal common equity (retained earnings)? A) 2.2222% B) 2.3529% C) 7.7222% D) 7.8444% E) 7.8529% F) 7.9824% Answer: b. What is the cost of external common equity? A) 2.3529% B) 7.7222% C) 7.8444% D) 7.8529% E) 7.9824% Answer: 3) Mullin has preferred stock with a current market price of $40 per share. The preferred stock pays an annual dividend of 5% based on its par value of $100. Flotation costs associated with the sale of preferred stock equal $1.50 per share. The company's marginal tax rate is 35%. Therefore, the cost of issuing new preferred stock is: A) 4.2857% B) 8.7500% C) 12.5000% D) 12.9870% E) 16.2500% Answer: 4) The Red Storm Inc. is planning a $100 million expansion. The expansion will be financed by selling $45 million in new debt and $55 million in new common stock. The before-tax cost of debt is 5 percent and the cost on equity is 12 percent. If the company is in the 35 percent tax bracket, what is the firm's weighted average cost of capital of the expansion? A) 5.7525% B) 6.2600% C) 6.5400% D) 7.3875% E) 8.0625% Answer: 5) St. John's wants to borrow money to build a new business school. They need $25 million. They can borrow in the US at 4.5% or in the UK for 7.5% for 1 year. Assume the current exchange rate is $1.4:1.0, what is the 1-year future exchange rate? A) $0.6944/1 B) $0.7348/1 C) $1.3609/1 D) $1.4000/1 E) $1.4402/