1. Please use the rate function in excel to solve this problem. Martin Inc.s bonds will mature in 10 years. The coupon interest rate on the bonds is 6.75 percent, paid at the end of each year. The bonds have maturity values of $1,000 each and are currently selling at a market price of $1,144. What is the yield to maturity?

1. For the problem above, if the companys marginal tax rate is 25 percent, what is the after-tax cost of existing debt?

1. Souths preferred stock has a par value of $80 a share and a market price of $48 a share. Dividends per year are $6.2. What is the cost of existing preferred stock?

1. For the problem above, if the flotation cost for new preferred stock is $1.20, what is the cost of new preferred stock?

1. Sun Electric is expected to pay a dividend of $2.85 per share over the next year, and the stock is currently selling for $35 a share. If dividends are expected to grow at 3.5 percent a year, what is the cost of existing common stock?

1. For the problem above, if the flotation cost for new common stock is $1.00, what is the cost of new common stock?

1. S Corporations common stock has a beta of .83. The interest rate on 10 year U.S. Treasury bonds is 4.2 percent, and the interest rate on 1 year U.S. Treasury bills is 1.18 percent. Assuming an average market risk premium of 5.5 percent, use the mean-variance capital asset pricing model to estimate the cost of existing common equity for S Corporation.

1. Mark Inc. is a privately held company, so there is no information about beta available. However, a company in the same business with a debt to equity ratio the same as that of Mark Inc. is publicly traded and has a beta of 1.75. If the risk-free rate is 3.8 percent, and the average market risk premium is 5.5 percent, what is the estimated cost of existing equity for Mark Inc.?

1. If a company has a beta of 1.25 and is considering a high risk project outside its normal course or business with a beta of 1.8, what beta should the company use? The 1.25 or the 1.8? Why?

1. A company is operating in three areas of the economy (sectors or industries) and the divisional betas are presented below:

• Beta Value

Division A .75 $200,000

Division B 1.35 $300,000

Division C 1.80 $500,000

What is the companys beta?

1. Foe Corporations has the capital structure given below:

Debt (at market value) $2,000,000

Preferred stock (at market value) $800,000

Common stock (at market value) $ 3,000,000

Assuming the market weight are also the target weights for Foe Corp. please calculate the weights that should be used to find the weighted average cost of capital for Foe Corp.

1. For the problem above, if the after tax cost of debt is 8% the cost of preferred stock is 9% and the cost of common stock is 12%, what is the weighted average cost of capital?

Kay Corporation has a marginal cost of capital schedule as follows:

Weighted average Cost

First $1 million pool of money 12%

Second $2 million pool of money 13%

Amounts above $3 million 15%

The company is considering the following assets:

Net Present Value at WACC of

Asset Cost IRR 12% 13% 15%

A $1,000,000 17% $400,000 $350,000 $250,000

B 900,000 16 200,000 190,000 150,000

C 600,000 15 200,000 180,000 0

D 500,000 14 100,000 60,000 -50,000

E 500,000 13.8 150,000 80,000 -70,000

F 500,000 13.5 80,000 30,000 -100,000

In which assets should the company invest( in which order)?