Find your question
and Get expert's answers*
Homework Help
*Click here to submit
Refer a Friend
Discount up to 15%*
Prepared References
Save up to 50%*
  Computing the cost of debt before taxes and after taxes

Problem 1

A company issues 15-year, $1,000 par-value bonds, with a coupon rate of 5%. The bonds are sold for $619.70. The tax rate is 30%. Compute the cost of debt before taxes and after taxes.

Problem 2

Suppose a company issues common stock to the public for $25 a share. The expected dividend is $2.50 per share and the growth in dividends is 8%. If the flotation cost is 10% of the issue proceeds, compute the cost of external equity, re.

Problem 3

Calculate the cost of preferred stock (rPS) with the given information:
    Par Value = $200
    Current Price = $208
    Flotation Cost = $16
    Annual Dividend = 12% of Par

Problem 4

A company is investigating the effect on its cost of capital with respect to the tax rate. Suppose there is a capital structure of 20% debt, 10% preferred stock, and 70% common stock. The cost of financing with retained earnings is re = 12%, the cost of preferred stock financing is rPS = 7%, and the before-tax cost of debt is rd = 9%. Calculate the weighted average cost of capital (WACC) given a tax rate of 35%.

Course:- Finance Basics
Ref. No:- TGS01867

Get Answer

Like US:-

More Finance Basics Questions

Miller Electronics is considering two new investments. Project C calls for the purchase of a coolant recovery system. Calculate the NPV of the projects based on a zero discount rate.

Calculate the Project OCF, Project NPV, Project Cash Flow from Assets and Modified ACRS.

Leggio Corporation issued twenty year, 7 percent yearly coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6 percent.

Its really helpful guide for me.
Posted on: December 12, 2012
Thanks a lot for your expert's assistance..
Posted on: Feb 2, 2013
Post Comment
Assignment Help