1. To help finance a major expansion, Castrol Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. The bond has a 9.25% annual coupon, which is paid semiannually, and sells at $1,075 today. The par value of the bond when issued was $1,000. If the firm's tax rate is 40%, what is the after tax cost of debt?

   		8.47%
   		5.23%
   		5.08%
   		4.23%

6 points

QUESTION 19

1. Scanlon Inc's CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: risk free rate = 4.1%; market risk premium = 5.25%; and beta = 1.3. Based upon CAPM approach, what is the cost of equity?

   		5.6%
   		9.97%
   		10.28%
   		10.93%