Finance Hw

Finance Hw







1. To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity.   This bond has a 9.25% annual coupon, paid semiannually, sells at a price of $1,075, and has a par value of $1,000.   If the firm's tax rate is 40%, what is the component cost of debt for use in the WACC calculation?


      a. 4.35%
      b. 4.58%
      c. 4.83%
      d. 5.08%
      e. 5.33%


2 Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually.   The bond currently sells for $925 and the company‚Äôs tax rate is 40%.   What is the component cost of debt for use in the WACC calculation?


      a. 4.28%
      b. 4.46%
      c. 4.65%
      d. 4.83%
      e. 5.03%


3 Assume that Kish Inc. hired you as a consultant to help estimate its cost of common equity.   You have obtained the following data:   D0 = $0.90; P0 = $27.50; and g = 7.00% (constant).   Based on the DCF approach, what is the cost of common from retained earnings?


      a. 9.29%
      b. 9.68%
      c. 10.08%
      d. 10.50%
      e. 10.92%


4 Rivoli Inc. hired you as a consultant to help estimate its cost of common equity.   You have been provided with the following data:   D0 = $0.80; P0 = $22.50; and g = 8.00% (constant).   Based on the DCF approach, what is the cost of common from retained earnings?


      a. 10.69%
      b. 11.25%
      c. 11.84%
      d. 12.43%
      e. 13.05%



5 Weaver Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share.   New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred.   What would be the cost of equity from new common stock?


      a. 12.70%
      b. 13.37%
      c. 14.04%
      d. 14.74%
      e....

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