A. A semiannual, 6 percent bond matures in 14 years and has a face value of $1,000. The market quote on this bond is 1,024. What is the aftertax cost of debt if the tax rate is 34 percent?
B. Denver Interiors has 77,000 shares of common stock outstanding at a price per share of $29. The firm also has 28,500 shares of preferred stock outstanding at a price per share of $38. There are 3,200 outstanding bonds with a face value of $1,850 and a price quote of 101.1. What is the capital structure weight of the preferred stock?
C. Meiston Press has a debt-equity ratio of 2.00. The pre-tax cost of debt is 9.10 percent and the cost of equity is 14.3 percent. What is the firm’s weighted average cost of capital (WACC) if the tax rate is 34 percent?