Question 1. A firm is considering a $300,000 debt issue. Their corporate tax rate is 34%. This long-term issue will pay a coupon rate of 5.6%. What is the after-tax cost of this debt?

• 37%
• 3.67%
• 32%
• 1.56

Question 2. If a firm pays a constant dividend of $3.45 a share and investors require a 12% return, what is the value of that firm's stock?

• $12.45
• $345.00
• $28.75
• $34.50

Question 3. Next year, stockholders will benefit from a 7% increase over the current dividend of $4.86, and every indication points to continued growth at this same pace. This stock is currently trading at $42 per share. Given that it costs $2.88 per share to issue new common stock, what is the cost of new common equity capital?

• 19.42%
• 20.29%
• 12.38%
• 12.42%

Question 4. A firm offers a 15-year maturity bond with $1,000 face value and 6% coupon rate. The current market price for the bond is $998. Selling the bonds costs the firm $60 per share. What is the after-tax cost of this debt, assuming a 34% corporate tax?

• 6.60%
• 8.12%
• 4.40%
• 31.73%

Question 5. On the secondary market, bonds are trading at $1105. The bonds have a 3.75% coupon rate paid annually and mature in five years. What is the yield to maturity (expressed at an annual rate) for the bonds if an investor buys them at the $1105 market price, and what is the current yield?

• This bond has a yield-to-maturity rate of 1.55% and a current yield of 3.39%.
• This bond has a yield-to-maturity rate of 1.38% and a current yield of 3.75%.
• This bond has a yield-to-maturity rate of 1.55% and a current yield of 3.75%.
• This bond has a yield-to-maturity rate of 5.63% and a current yield of 3.39%.

Question 6. The current dividend for a corporation is $3.73. The dividend is expected to increase by 12%, and it is expected to continue that rate of growth for the foreseeable future. Given that their stock is trading at $38 per share and that it costs $3.37 per share to issue new common stock, what is the cost of new common equity capital?

• 10.99%
• 22.77%
• 24.06%
• 10.77%

Question 7. A firm offers a 10-year maturity bond with $1,000 face value and 5.25% coupon rate. The current market price for the bond is $1025. Selling the bonds costs the firm $48 per share. What is the after-tax cost of this debt, assuming a 34% corporate tax?

• 5.56%
• 3.66%
• 6.07%
• 32.11%

Question 8. On the secondary market, bonds are trading at $925. The bonds have a 2.83% coupon rate paid semiannually and mature in three years. What is the yield to maturity (expressed at an annual rate) for the bonds if an investor buys them at the $925 market price?

• This bond has a yield-to-maturity rate of 8.55% and a current yield of 2.83%.
• This bond has a yield-to-maturity rate of 3.21% and a current yield of 2.83%.
• This bond has a yield-to-maturity rate of 5.58% and a current yield of 3.06%.
• This bond has a yield-to-maturity rate of 2.79% and a current yield of 3.06%.

Question 9. A common stock paid a dividend of $3.75 this year. It is expected to grow at 8% each year for the foreseeable future. Investors require an 11% return rate. What is the value of a share of this stock?

• $135.00
• $125.00
• $22.50
• $3.97

Question 10. A firm has $76,000,000 in debt, which accounts for 43% of their total funds raised; the after-tax cost of these funds is 6.10%. The same firm has $100 million in common stock, which accounts for 57% of their total funds raised; their after-tax costs (including transaction costs) are 15.7%. What is the weighted average cost of capital for these funds?

• 2.63%
• 11.55%
• 10.21%
• 8.92%

Question 11. A firm issued $10 million in preferred stock at a price of $60.35 per share. The preferred shares carry an 11% dividend. The firm pays $2.87 per share in flotation costs per share. What is the cost of capital for this issuance of preferred stock?

• 11.54%
• 2.31%
• 43.23%
• 16.01%

Question 12. A preferred stock pays 3% on its par value of $200, and the required rate of return is 9%. What is the dividend?

• $6
• $60
• $18
• $1.80

Question 13. A stock paid $3.17 in dividends at the end of last year and is expected to pay a cash dividend until infinity. No growth is expected. Investors require a 6% rate of return. What is the value of the common stock?

• 3.17
• 56
• 52.83
• 5.28

Question 14. A preferred stock pays 3% on its par value of $200, and the required rate of return is 9%. What is the value of the preferred stock?

• $60
• $67
• $200
• $267

Question 15. The table below shows a firm's capital structure and estimated capital costs. Calculate this firm's weighted average cost of capital.

• 9.00%
• 10.51%
• 12.85%
• 15.35%