Problem 1:

Please explain what is the capital structure of a company.

Problem 2:

List the sources of long-term financing used by companies to finance investment capital, in order of lowest to highest cost, and explains what is the factor that causes one source of capital to be more or less expensive than other sources.

Problem 3:

Using the debt cost approximation formula, determine the pre-tax cost for a bond that sells for $ 925 of its par value and pays a coupon of $ 85 for 20 years. The flotation costs are $ 5 per bond. Please show calculations.

Problem 4:

For the case in problem 3, calculate the cost of debt after taxes if the company's tax liability is 40%. Please show calculations.

Problem 5:

Consider issuing preferred shares with an annual dividend of $ 12.00 per preferred share. These shares will sell for $ 100 each. The flotation cost is $ 8 per share. Calculate the preferred cost of capital. Please show calculations.

Problem 6:

DupT Corporation plans to issue a common stock issue to finance its next capital investment project. The market price of the corporation's shares is $ 75 per share. A dividend of $ 5 per share is expected at the end of the year. The corporation has had an average annual growth of 6%. The issue cost is $ 2.50 per share. Determine the cost of equity capital using the Gordon Growth Model. Please show calculations.