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QUESTION 4 XYZ Corporation is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $985 for the 10-year
QUESTION 4 XYZ Corporation is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $985 for the 10-year bond. Bender and Co. can expect to pay an additional risk premium of 4.2% on common stock. What is the firm's cost of equity capital? 13.10 4.20 13.44 0 9.24 O none of the available choices QUESTION 5 A firm is considering a project and plan to obtain a target capital structure with $21,879 of debt at a before-tax cost of 9.6%, $72,369 of preferred stock at a cost of 10.7% and $17,459 of equity at a cost of 13,5%. The firm faces a tax rate of 40%. What will be the firm's weight on preferred stock? (your answer should be in percentages so 10% would be entered as 10) 10 QUESTION B Which of the following reasons causes bonds to be a less expensive form of capital for a public firm than the issuance of common stock? Bondholders.. b. have prior voting rights over common stockholders. b. and a . receive greater returns than common stockholders
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