1. Whitewall Tire Co. just paid an annual dividend of $1.25 on its common shares. If Whitewall is expected to increase its annual dividend by 6.30 percent per year into the foreseeable future and the current price of Whitewall’s common shares is $13.95, what is the cost of common stock for Whitewall? (Round answer to 2 decimal places, e.g. 15.25%.)
2. Seerex Wok Co. is expected to pay a dividend of $1.35 one year from today on its common shares. That dividend is expected to increase by 2.20 percent every year thereafter. If the price of Seerex is $17.49, what is Seerex’s cost of common stock? (Round intermediate calculations to 4 decimal places, e.g 0.5212 and final answer to 2 decimal places, e.g. 15.25%.)
3. Fjord Luxury Liners has preferred shares outstanding that pay an annual dividend equal to $13 per year. If the current price of Fjord preferred shares is $153, what is the after-tax cost of preferred stock for Fjord? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
4. Kresler Autos has preferred shares outstanding that pay annual dividends of $11, and the current price of the shares is $111. What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred are 5 percent? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
5. Capital Co. has a capital structure, based on current market values, that consists of 30 percent debt, 12 percent preferred stock, and 58 percent common stock. If the returns required by investors are 12 percent, 13 percent, and 14 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
6. You know that the after-tax cost of debt capital for Bubbles Champagne is 5.3 percent. Assume that the firm has only one issue of five-year bonds outstanding. The bonds make semiannual coupon payments and the marginal tax rate is 30 percent.
Calculate Pre-tax cost of debt capital. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
7. You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 9.80 percent coupon bonds are selling at a price of $1,247.34. The bonds pay interest semiannually. These bonds are the only debt outstanding for the firm.
8. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
The current YTM for the bonds = %
2. Seerex Wok Co. is expected to pay a dividend of $1.35 one year from today on its common shares. That dividend is expected to increase by 2.20 percent every year thereafter. If the price of Seerex is $17.49, what is Seerex’s cost of common stock? (Round intermediate calculations to 4 decimal places, e.g 0.5212 and final answer to 2 decimal places, e.g. 15.25%.)
3. Fjord Luxury Liners has preferred shares outstanding that pay an annual dividend equal to $13 per year. If the current price of Fjord preferred shares is $153, what is the after-tax cost of preferred stock for Fjord? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
4. Kresler Autos has preferred shares outstanding that pay annual dividends of $11, and the current price of the shares is $111. What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred are 5 percent? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
5. Capital Co. has a capital structure, based on current market values, that consists of 30 percent debt, 12 percent preferred stock, and 58 percent common stock. If the returns required by investors are 12 percent, 13 percent, and 14 percent for the debt, preferred stock, and common stock, respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
6. You know that the after-tax cost of debt capital for Bubbles Champagne is 5.3 percent. Assume that the firm has only one issue of five-year bonds outstanding. The bonds make semiannual coupon payments and the marginal tax rate is 30 percent.
Calculate Pre-tax cost of debt capital. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
7. You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 9.80 percent coupon bonds are selling at a price of $1,247.34. The bonds pay interest semiannually. These bonds are the only debt outstanding for the firm.
8. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
The current YTM for the bonds = %
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