1. What is the after-tax cost of the following preferred equity? The par value of the preferred share is $100 and the annual dividend is $5.00. The preferred shares have no stated maturity. The current market price of the share is $70. Assume that the corporate tax rate is 39%.
The after-tax cost of the preferred equity is ()%. (Round to two decimal places.)
4. Pan American Airlines' shares are currently trading at $71.56 each. The yield on Pan? Am's debt is 66% and the? firm's beta is 0.7. The T-Bill rate is 3.5% and the expected return on the market is 8%. The? company's target capital structure is 40% debt and 60% equity. Pan American Airlines pays a combined federal and state tax rate of 45%. What is the estimated cost of common equity, employing the Capital Asset Pricing Model? (CAPM)
The estimated cost of common equity for Pan American Airlines is ()%. (Round to two decimal places.)