1. ABC Company has publicly traded $1,000 par value, 6% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $915. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 34%.
What is this company's after-tax cost of debt?
2. ABC Company has publicly traded $1,000 par value, 6% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $915. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 34%.
What is the cost of the company's common stock
3. You are considering a project that requires an initial investment of $98,000 with a cost of capital of 14%. You expect the project to have a five-year life, and produce cash flows of $19,000 in year 1, $32,000 in year 2, $54,000 in year 3, $26,000 in year 4 and $10,000 in year 5.
What is this project's net present value
4. You are considering a project that requires an initial investment of $98,000 with a cost of capital of 14%. You expect the project to have a five-year life, and produce cash flows of $19,000 in year 1, $32,000 in year 2, $54,000 in year 3, $26,000 in year 4 and $10,000 in year 5.
What is this project's discounted payback period