Berta industries stock has a beta of 125 the company just

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9. Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 34 percent, what is the aftertax cost of Ying’s debt?

Bond Coupon Rate Price Quote Maturity Face Value

1 6.00 % 105.86 5 years $ 40,000,000

2 7.50 114.52 8 years 35,000,000

3 7.20 113.07 15 1/2 years 55,000,000

4 6.80 102.31 25 years 50,000,000
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10. Berta Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 5.5 percent. The most recent stock price for Berta is $72.

a. Calculate the cost of equity using the DCF method.
b. Calculate the cost of equity using the SML method.

Reference no: EM13387755

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