You are given the following information for Huntington Power Co. Assume the companys tax rate is 40 percent

Debt:	7,000 7.4 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 103 percent of par; the bonds make semiannual payments.
Common stock:	460,000 shares outstanding, selling for $64 per share; the beta is 1.07.
Market:	7 percent market risk premium and 5.4 percent risk-free rate.

What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Floyd Industries stock has a beta of 1.30. The company just paid a dividend of $.30, and the dividends are expected to grow at 4 percent per year. The expected return on the market is 13 percent, and Treasury bills are yielding 5.4 percent. The most recent stock price for the company is $71.

a.	Calculate the cost of equity using the DDM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b.

Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Shanken Corp. issued a 30-year, 10 percent semiannual bond 4 years ago. The bond currently sells for 94 percent of its face value. The company's tax rate is 35 percent.

a.	What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b.	What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c.

Which is more relevant, the pretax or the aftertax cost of debt?

The Saunders Investment Bank has the following financing outstanding.

Debt:	20,000 bonds with a coupon rate of 12 percent and a current price quote of 110.0; the bonds have 20 years to maturity. 190,000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity.
Preferred stock:	110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100.
Common stock:	2,200,000 shares of common stock; the current price is $71, and the beta of the stock is 1.45.
Market:	The corporate tax rate is 30 percent, the market risk premium is 5 percent, and the risk-free rate is 2 percent.

What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Shanken Corp. issued a 20-year, 10 percent semiannual bond 2 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $50 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52 percent of par. The companys tax rate is 35 percent.

What is the company's total book value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

What is the company's total market value of debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

What is your best estimate of the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost $14.4 million, and the company paid $765,000 in flotation costs. In addition, the equity issued had a flotation cost of 7.4 percent of the amount raised, whereas the debt issued had a flotation cost of 3.4 percent of the amount raised. If the company issued new securities in the same proportion as its target capital structure, what is the companys target debtequity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

Titan Mining Corporation has 8.8 million shares of common stock outstanding and 320,000 4 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $36 per share and has a beta of 1.4, and the bonds have 10 years to maturity and sell for 117 percent of par. The market risk premium is 7.6 percent, T-bills are yielding 5 percent, and the companys tax rate is 38 percent.

a.

What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)

b.	If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Famas Llamas has a weighted average cost of capital of 10.4 percent. The companys cost of equity is 13 percent, and its cost of debt is 8.4 percent. The tax rate is 40 percent. What is the companys debtequity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

The Dybvig Corporations common stock has a beta of 1.9. If the risk-free rate is 5 percent and the expected return on the market is 12 percent, what is Dybvigs cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)