Not sure how to get 18 -- thus finding 19 & 20 is difficult--

A firm has determined its optimal structure which is composed of the following sources and target market value proportions.

Target Market Source of Capital Proportions Long-term debt 60% Common stock equity 40

Debt: The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 percent of the face value would be required in addition to the premium of $50.

Common Stock: A firm's common stock is currently selling for $75 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.10. It is expected that to sell, a new common stock issue must be underpriced $2 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm has a marginal tax rate of 40 percent.

18) The firm's cost of retained earnings is ________. (See Table 9.2) A) 18.9 percent B) 15.0 percent C) 10.2 percent D) 14.3 percent

19) The weighted average cost of capital up to the point when retained earnings are exhausted is ________. (See Table 9.2) A) 7.7 percent B) 11.29 percent C) 8.7 percent D) 6.8 percent

20) Assuming the firm plans to pay out all of its earnings as dividends, the weighted average cost of capital is ________. (See Table 9.2) A) 12.1 percent B) 10.44 percent C) 8.9 percent D) 11.6 percent 20)

MULTIPLE CHOICEChoose the one alternative that best completes the staternent or answers the question. Table 9.2 A firm has determined its optimal structure which is composed of the following sources and target market value proportions. arget Source of Capital term debt 60% 40 Common stock Debt: The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,050. A flotation cost of 2 peroent of the face value would be required in addition to the premium of $50. Common Stock: A firm's common stock is currently selling for $75 per share. The dividend expected to be paid at the end of the coming year is $5. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.10. It is expected that to sell, a new common stock issue must be underpriced $2 per share and the firm must pay $1 per share in flotation costs. Additionally, the firm has a marginal tax rate of 40 percent. I5) The firm's before-tax cost of debt isSee Table 9.2) 15) A) 11.2 percent B) 10.6 percent )7.7 percent D) 12.7 percent 16) The firm's after-tax cost of debt is . (See Table 9.2) 16) A)7 percent B) 77 percent See Table 9, C) 6 percent D) 4.6 percent 17) The firm's cost of a new issue of common stock is (See Table9.2) B) 16.7 percent A) 14.3 percent C) 10.2 percent D) 15.2 percent 18) The firm's cost of retained earnings is_See Table 9.2) A) 18.9 percent B) 15.0 percent C 10.2 percent D) 14.3 percent 19 The weighted average cost of capital up to the point when retained earnings are exhausted is (See Table 9.2) A) 7.7 percent B) 11.29 percent C) 8.7 percent D) 6.8 percent 20) Assuming the firm plans to pay out all of its earnings as dividends, the weighted average cost of 20) capital is(See Table 9.2) A) 12.1 percent B) 10.44 percent C) 8.9 percent D) 11.6 percent