What would be the approximate after-tax cost of debt

Question

1. Assume a corporation has earnings before depreciation and taxes of $130,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company?

• $106,800
• $97,800
• $103,000
• $107,600

2. The pre-tax cost of debt for a new issue of debt is determined by

• the investor's required rate of return on issued stock.
• the coupon rate of existing debt.
• the yield to maturity of outstanding bonds.
• all of these.

3. Financial capital does not include

• preferred stock.
• working capital.
• stock.
• bonds.

4. Firm X has a tax rate of 26%. The price of its new preferred stock is $60 and its flotation cost is $4.00. The cost of new preferred stock is 14%. What is the firm's dividend? (Round your answer to 2 decimal places.)

• $7.84
• $9.99
• $6.49
• $9.29

5. The coupon rate on an issue of debt is 12%. The yield to maturity on this issue is 11%. The corporate tax rate is 33%. What would be the approximate after-tax cost of debt for a new issue of bonds? (Round your answer to 2 decimal places.)

• 6.02%
• 7.37%
• 9.52%
• 8.82%