Tax rate 30%

Riskfree rate 3%

Market rate 11%

Coupon (not provided) zero coupon bond

Use the Table below and the yields to maturity chart in the slides to answer Questions 1 to 7.

1. What is the yield to maturity on the bond issue?

2. What percentages do the loan and bond issue contribute to the firms total debt?

3. Find the after-tax weighted average cost of debt.

4. What is cost of common stock?

5. What is the market value of the common stock?

6. What are the percentages of debt and equity in the firms capital structure?

7. What is the firms weighted average cost of capital?

Use the Table below and the yields to maturity chart in the slides to answer Questions 1 to 7.

8. What is the yield to maturity on the bond issue?

9. What percentages do the loan and bond issue contribute to the firms total debt?

10. Find the after-tax weighted average cost of debt.

11. What is cost of common stock?

12. What is the market value of the common stock?

13. What are the percentages of debt and equity in the firms capital structure?

14. What is the firms weighted average cost of capital?

Loan Common stock $10,000,000 0.045 Amount Beta 1.10 Shares outstanding 10,000,000 Interest rate Bond issue $5.00 Price per share 30 yr. AAA rated 21,000 $1,100 Number issued Price per bond Common stock Loan $5,000,000 1.40 Amount Beta Shares outstanding 2,000,000 Price per share 0.05 Interest rate Bond issue $9.45 7 yr. AAA rated 7,500 $1,010 Number issued Price per bond Loan Common stock $10,000,000 0.045 Amount Beta 1.10 Shares outstanding 10,000,000 Interest rate Bond issue $5.00 Price per share 30 yr. AAA rated 21,000 $1,100 Number issued Price per bond Common stock Loan $5,000,000 1.40 Amount Beta Shares outstanding 2,000,000 Price per share 0.05 Interest rate Bond issue $9.45 7 yr. AAA rated 7,500 $1,010 Number issued Price per bond