Reference no: EM132961719
Questions -
Q1. Bob Corporation has a pretax cost of debt of 12% and is in the 35% marginal tax bracket. What is Bob's after-tax cost of debt?
Q2. Ted Corporation wants to estimate its cost of common equity using the Capital Asset Pricing Model. Assume the risk-free rate is 2.5%, the market risk premium is 6% and Ted Corporation has a Beta of .8. Using the capital asset pricing model, what is Ted's estimated cost of common equity?
Q3. Mary Corporation has $750,000 is outstanding debt with a market value of $750,000. Mary has common equity on the books at a value of $1,000,000 but it is selling in the market at $1,700,000. What are the book weightings for Mary Corporation?
Q4. Continuing from the prior problem, what are the market weightings for Mary Corporation?
Q5. Jerry Corporation has 400,000 bonds outstanding that are trading at $950. In addition, Jerry has 6,000,000 million shares of common stock outstanding at $82. What are the market weightings for Jerry Corporation?
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