Suppose Today is January 1, 2010; MAM industries issued a 30 year bond with a 9% annual coupon and a $1,000 face value, payable on January 1, 2030. The bond now sells for $915. Use this bond to determine the firms after-tax cost of debt. Assume a 34% tax rate.

MAM Industries just declared a dividend of $3.50 per share on common stock. The current stock price is $25 per share and the dividend is expected to increase at a rate of 4% per year for the foreseeable future. Use the dividend growth model to compute the cost of equity capital.

3. Suppose the market risk premium is 8.5%, the risk-free rate is 7% and MAM Industries has a beta of 1.35. Use the SML to compute the firms cost of equity capital.

ONLY SOLVE 3