Question
Please answer questions below with procedure Q1: Company A issued 200,000 perpetual preferred shares with a face value of $100 each. The dividend on the
Please answer questions below with procedure
Q1: Company A issued 200,000 perpetual preferred shares with a face value of $100 each. The dividend on the preferred shares is 8%. The current market price of the shares is $110. Calculate the cost of the preferred shares?
Q2: Company A has a beta of 1.1. The market risk premium is 7% and the risk-free rate is 4%. Company A last annual dividend was $2 and the dividend is expected to grow 5% every year. The current stock price is $20. Find the cost of equity capital for Company A using the CAPM method?
Q3: Company bought an asset for $12,000 which is in the five-year MACRS class. Calculate the depreciation of the asset using five-year MACRS and the book values at the end of each year. The percentage for five-year class is Year 1 20%, Year 2 32%, Year 3 19.2%, Year 4 11.52%, Year 5 11.52% and Year 6 5.76%? What would be the book value at the end of year 5?
Q4: A bond was issued on January 1, 2020 and will mature on January 1, 2035, i.e., has 15 left for maturity. The coupon rate is 5.10% and the coupons are paid semi-annually. The bond is currently selling for $1,070 per $1,000 bond or at 107. What is the pre-tax approximate cost of the debt? Use the approximate Yield To Maturity formula.
Q5: A bond was issued on January 1, 2020 and will mature on January 1, 2045, i.e., has 25 left for maturity. The coupon rate is 5.80% and the coupons are paid semi-annually. The bond is currently selling for $1,080 per $1,000 bond or at 108. Tax rate is 21%. What is the after-tax approximate cost of the debt? Use the approximate Yield To Maturity formula : YTM = {annual dollar coupon payment + [(par value - market price)/remaining maturity in years]}/[(par value + price)/2]
Q6: We buy a machine costing $12,000 and the book value of the machine at the end of five years is $691.20. If the sale price of the machine is $3,000, how much tax would we have to pay or save? Assume tax rate of 20%.
Q7: You purchase equipment for $100,000, and it costs $10,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $17,000 when you are done with it in 6 years. The companys marginal tax rate is 21%. What is the depreciation expense each year and the after-tax salvage in year 6 for each of the following situations?
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