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1. Baxter Inc. has a target capital structure of 30% debt, 15% preferred stock, and 55% common equity. The company's after-tax cost of debt is 7%, its cost of preferred stock is 11%, its cost of retained earnings is 15%, and its cost of new common stock is 16%. The company stock has a beta of 1.5 and the company's marginal tax rate is 35%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?
12%
13.8%
14.45%
11.2%
2. Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Crandal's flotation expense on the new bonds will be $50 per bond. Crandal's marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?
10.25%
8.12%
8.76%
7.49%
What is the market price of a $1000, 8 percent bond if comparable market interest rates drop to 6 percent and the bond matures in 15 years?
Suppose an individual invests $40,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 4.4 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..
Risk-free rate is 3% and that the market risk is premium is 5%. What is the required rate of return on a stock with a beta of 0.9? What is the required rate of return on a stock with a beta of 2.1? What is the required return on the market?
stock xmarketstock
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ABC Co., a corporation had gross sales of $500,000 in 2008. Additionally, the company also received $100,000 in dividend income and $50,000 as interest income. The total expenditures of this company for 2008 were $272,000. Suppose the tax rate on tax..
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