Question 2:

(Individual or component costs of capital) Compute the cost of capital for the firm for the following: .a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.5 percent. Interest payments are $52.50 and are paid semiannually. The bonds have a current market value of $1,125 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.85 dividend last year. The firm's dividends are expected to continue to grow at 7.5 percent per year, forever. The price of the firm's common stock is now $27.22. -c. A preferred stock that sells for $128, pays a dividend of 8.3 percent, and has a $100 par value. d. A bond selling to yield 12.2 percent where the firm's tax rate is 34 percent. a. The after-tax cost of debt is \%. (Round to two decimal places.) (Related to Checkpoint 14.2) (Cost of common equity) Salte Corporation is issuing new common stock at a market price of $27.99. Dividends last year were $1.47 and are expected to grow at an annual rate of 6.6 percent forever. What is Salte's cost of common equity? The company's cost of common equity is \%. (Round to two decimal places.)