a. A bond that has $1,000 par value? (face value) and a contract or coupon interest rate of 12 percent. A new issue would have a floatation cost of 6 percent of the $1,135 market value. The bonds mature in 8 years. The? firm's average tax rate is 30 percent and its marginal tax rate is 30 percent. What is the after tax cost of the bond?
b. A new common stock issue that paid a $1.80 dividend last year. The par value of the stock is? $15, and earnings per share have grown at a rate of 9 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant? dividend-earnings ratio of 30 percent. The price of this stock is now $24, but 6 percent flotation costs are anticipated. What is the cost of external common? equity?
c. Internal common equity when the current market price of the common stock is ?$46. The expected dividend this coming year should be $3.20 increasing thereafter at an annual growth rate of 12 percent. The? corporation's tax rate is 34 percent. What is the cost of internal common? equity?
d. A preferred stock paying a dividend of 9 percent on a $100 par value. If a new issue is? offered, flotation costs will be 12 percent of the current price of ?$179. What is the cost of capital for the preferred? stock?
e. A bond selling to yield 12 percent after flotation? costs, but before adjusting for the marginal corporate tax rate of 34 percent. In other? words, 12 percent is the rate that equates the net proceeds from the bond with the present value of the future cash flows? (principal and? interest). What is the? after-tax cost of debt on the? bond?