we During the last few years, XYZ Corporation has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Sarah Smith, the financial vice president. Your first task is to estimate XYZ's cost of capital. Smith has provided you with the following data, which she believes may be relevant to your task: o The firm's tax rate is 30%. The current price of XYZ Corporation's 11% coupon, semiannual payment, and noncallable bonds with 20 years remaining to maturity is $1,250.80. There are 80,000 bonds. XYZ Corporation does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. The current price of the firm's 9%, $100 par value, quarterly dividend, perpetual preferred stock is $105.75. There are 150,000 outstanding shares. XYZ Corporation would incur flotation costs equal to 4% of the proceeds on a new issue. o XYZ Corporation's common stock is currently selling at $40 per share. There are 4 million outstanding common shares. Its last dividend (D0) was $2.50, and dividends are expected to grow at a constant rate of 4.5% in the foreseeable future. XYZ Corporation's beta is 1.1, the yield on T-bonds is 5.2%, and the market risk premium is estimated to be 5.8%. For the own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3.0% risk premium. To help you structure the task, Sarah Smith has asked you to answer the following questions: 1. What is the market interest rate on XYZ's debt, and what is the component cost of this debt for WACC purposes?

During the last few years, XYZ Corporation has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Sarah Smith, the financial vice president. Your first task is to estimate XYZ's cost of capital. Smith has provided you with the following data, which she believes may be relevant to your task: - The firm's tax rate is 30%. - The current price of XYZ Corporation's 11% coupon, semianual payment, and noncallable bonds with 20 years remaining to maturity is $1,250.80. There are 80,000 bonds. XYZ Corporation does not use short-tem interest-bearing debt on a permanent basis, New bonds would be privately placed with no flotation cost. - The current price of the firm's 9%,$100 par value, quarterly dividend, perpetual preferred stock is $105,75. There are 150,000 outstanding shares. XYZ Corporation would incur flotation costs equal to 4% of the proceeds on a new issue. - XYZ Corporation's common stock is currently selling at \$40 per share. There are 4 million outstanding common shares. Its last dividend (D0) was \$2.50, and dividends are expected to grow at a constant rate of 4.5% in the foreseeable future. XYZ Corporation's beta is 1.1 , the yield on T-bonds is 5.2%, and the market risk premium is estimated to be 5.8%. For the own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3.0% risk premium. To help you structure the task, Sarah Smith has asked you to answer the following questions: 1. What is the market interest rate on XYZ's debt, and what is the component cost of this debt for WACC purposes? During the last few years, XYZ Corporation has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Sarah Smith, the financial vice president. Your first task is to estimate XYZ's cost of capital. Smith has provided you with the following data, which she believes may be relevant to your task: - The firm's tax rate is 30%. - The current price of XYZ Corporation's 11% coupon, semianual payment, and noncallable bonds with 20 years remaining to maturity is $1,250.80. There are 80,000 bonds. XYZ Corporation does not use short-tem interest-bearing debt on a permanent basis, New bonds would be privately placed with no flotation cost. - The current price of the firm's 9%,$100 par value, quarterly dividend, perpetual preferred stock is $105,75. There are 150,000 outstanding shares. XYZ Corporation would incur flotation costs equal to 4% of the proceeds on a new issue. - XYZ Corporation's common stock is currently selling at \$40 per share. There are 4 million outstanding common shares. Its last dividend (D0) was \$2.50, and dividends are expected to grow at a constant rate of 4.5% in the foreseeable future. XYZ Corporation's beta is 1.1 , the yield on T-bonds is 5.2%, and the market risk premium is estimated to be 5.8%. For the own-bond-yield-plus-judgmental-risk-premium approach, the firm uses a 3.0% risk premium. To help you structure the task, Sarah Smith has asked you to answer the following questions: 1. What is the market interest rate on XYZ's debt, and what is the component cost of this debt for WACC purposes