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Rattle me Bones, Inc. has a bond outstanding with10 years to maturity. It pays an 10% annual coupon and has a $1,000 face value. If

  1. Rattle me Bones, Inc. has a bond outstanding with10 years to maturity. It pays an 10% annual coupon and has a $1,000 face value. If the current price per bond is $921.32, what is the firm's pre-tax cost of debt?

2. Rattle me Bones, Inc. has a perpetual preferred stock. The preferred stock is currently trading at $60 per share. If the annual dividend on the preferred stock is $5, what is the firms cost of preferred stock?

  1. Rattle me Bones, Inc.'s common stock is currently selling for $70.25 per share. You expect to receive a dividend of $3.50 per share in one year. If the firm has a constant dividend growth rate of 5%, what is its cost of retained equity?

  1. Your companys stock sells for $40 per share, its last dividend (D0) was $3.00, its growth rate is a constant 6 percent, and the company will incur a flotation cost of 10 percent if it sells new common stock. What is the firms cost of new stock issue?

  1. Flaherty Electric has a capital structure that consists of 60 percent equity and 40 percent debt. The companys long-term bonds have a before-tax yield to maturity of 8 percent. The company uses the DCF approach to determine the cost of equity. Flahertys common stock currently trades at $45 per share. The year-end dividend (D1) is expected to be $3.50 per share, and the dividend is expected to grow forever at a constant rate of 6 percent a year. The company estimates that it will have to issue new common stock to help fund this years projects. The flotation cost on new common stock issued is 15 percent, and the companys tax rate is 40 percent. What is the companys weighted average cost of capital, WACC, if taking account of floatation cost?

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