Company X has $100,000 face value of outstanding bonds consisting of 100 $1,000 face value bonds with a 4% annual coupon and 20 years remaining until maturity. The bonds are currently selling a price of $900 (90% of face value). A new 20 year issue could be sold for a flotation cost of 5% of face value. The company is in the 40% tax bracket

. Calculate the investor's required rate of return on the bonds today

. If the investor's required rate of return on the bond was 3%, what would be the current price of the bond

. What is the total current market value of all of the outstanding bonds?

. What annual coupon would have to be placed on the new issue in order for it to sell at par?

. Calculate the flotation cost and tax savings from the proposed new bond issue

. Calculate the cost of the new bond financing

. Company X has $25,000 of outstanding preferred stock, consisting of 250 shares, each with $100 face value and currently selling for $90 a share. The preferred stock pays an annual dividend of $4 per share. A new preferred stock issue could be sold for a flotation cost of 7% of face value.

. Calculate the investor's required rate of return on the preferred stock today

. What annual dividend rate would have to be placed on the new issue for it to sell at par?

. Calculate the cost of the new preferred stock financing

. What is the total market value of all of the outstanding preferred stock?

. Company X has 10,000 shares of common stock outstanding that is currently selling for $60.00 a share. The company recently paid an annual dividend of $2.00 per share, and the dividend is expected to grow by 5% a year. An investment bank has advised that a new issue could be sold for a flotation cost of 8% of face value

. Calculate the dividend anticipated in the next year

. Calculate the investor's required rate of return from the company's common stock

. Calculate the company's cost of a new stock issue

. Calculate the investor's required rate of return if Company X had a Beta of 1.2, the risk-free rate is 4% and the market risk premium is 5%,

. Calculate the price of the Company's common stock based on your answers in a) and d)

. What is the total market value of all of the outstanding common stock?

. Company X has announced that its target capital structure will consist of 30% bond financing, 10% preferred stock financing, and 60% common equity financing.

. Calculate Company X's weighted average cost of capital (WACC) based on the target capital structure

. Calculate Company X's weighted average cost of capital (WACC) based on company's X market values for bonds, preferred stock, and common stock