Q.1 ABC Inc. can issue preferred stock at a price of $50 per share. These are expected to pay a yearly dividend of $4 per share. What is the company's cost pf preferred stock?

Q.2 Define XYZ Inc. is expected to issue a dividend of $3 per share to its coon stockholders at the end of the year. analysts expected the company to have a growth rate of 7% of the current stock price of $40. If new stock is used by the company, then it will get only $35 per share due to flotation costs.

1. Calculate cost of retained earnings of the company
2. Calculate the percentage of flotation cost of the company
3. Calculate the cost of new common stock is issued by the company.

Q.3 Explain Below is the balance sheet of ZZZ Inc. The company has cost of common stock as 15% and before -tax cost of debt as 10%. The company's tax rate is 30%. Calculate the company's WACC

Q.4 Company AAA Inc has a WACC of 12.75%. The company is considering taking up the flowing projects. All of them are equivalent to the riskiness of the company's existing assets. Which one should the company take up?

1. Project A, Investment $10,000 and Rate of Return 12%
2. Project B, Investment $100,000, Rate of return 12.5%
3. Project C Investment, $1million, Rate of Return 13%
4. Project D, Investment 41 million, Rate of return 15%
5. Project E $ Investment 10 million, Rate of return 13.5%

Answer-

Q.5 Suppose the stock price is $50, there are 3 million share stocks, there firm has 25 million of the preferred stock, and 75 million of debt. If cost of debt is 10%, tax rate is 40%, and cost of preferred stock is 9% and cost of stock is 14%. Estimate Weighted Average Cost of Capital.