Q3 ABM Ltd. is financed with $200,000 of debt, $200,000 of preference shares and $500,000 of ordinary shares (all mentioned values are market values). The cost of debt before tax is 4%, and the cost of preference share is 8%. The company is expected pay a $4 dividend per share on its ordinary share next year and the dividend has a constant growth rate of 10%. The current market price for the ordinary share is $80 per share. The company is subject to a 30% tax rate. What is the after-tax weighted average cost of capital for the company?

Select one:

a. 9.20%

b. 12.10%

c. 14.80%

d. 10.73%

Q4 The generally utlized model to estimate the cost of ordinary shares for a company, especially if the result will be used in discount rate for evaluating a project, is

Select one:

a. a one-stage constant growth model.

b. a multistage growth model.

c. the CAPM.

d. none of the other choices.

Q5 MBB Drilling Ltd. has issued 10-year zero-coupon bonds. Each of these bonds has a face value of $1000 and 8 years until maturity. The interest on the bonds is compounded semi-annually. The market price for the bonds is $910 per unit. What is the company's cost of debt after tax if corporate tax rate is 30%?

Select one:

a. 0.83%

b. 1.18%

c. 2.95%

d. 0.66%