Which is more relevant the pretax or the aftertax

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1. The Muse Co. just issued a dividend of $2.80 per share on its common stock. The company is expected to maintain a constant 5.80 percent growth rate in its dividends indefinitely. If the stock sells for $56 a share, what is the company's cost of equity?

2. he Zombie Corporation's common stock has a beta of 1.9. If the risk-free rate is 5.9 percent and the expected return on the market is 13 percent, what is the company's cost of equity capital?

3. Holdup Bank has an issue of preferred stock with a $5.95 stated dividend that just sold for $96 per share. What is the bank's cost of preferred stock?

4. Jiminy's Cricket Farm issued a 20-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 96 percent of its face value. The company's tax rate is 35 percent. a. b. What is the aftertax cost of debt? Cost of debt % c. Which is more relevant, the pretax or the aftertax cost of debt? Aftertax cost of debt Pretax cost of debt

5. Sixx AM Manufacturing has a target debt equity ratio of 0.30. Its cost of equity is 14 percent, and its cost of debt is 8 percent. If the tax rate is 34 percent, what is the company's WACC?

6. You are given the following information for Lightning Power Co. Assume the company's tax rate is 40 percent.

Reference no: EM13336168

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