Problen 14-3

1. A Bond that has a $1000 par value (face value) and a contract or coupon interest rate of 11.5%. The bonds have a current market value of $1124 and will mature in 10 years. The firm’s marginal rate is 34%.

The cost of capital from this bond debt is____%

2. A New common stock issue that paid a $1.76 dividend last year. The firm’s dividends are expected to continue to grow at 7.5% per year forever. The price of the firm’s common stock is now $27.49.

The cost of capital from the common equity is ______%.

3. A preferred stock paying an 9.6% dividend on a $133 par value.

The cost of the preferred stock is ____%

4. A bond selling to yield 12.5% where the firms tax rate is 34%.


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