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17. (C10) The Holmes Company's currently outstanding bonds have an 8% coupon and a 13% yield to maturity. Holmes believes it could issue new bonds at par that would provide a 4 similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? 18. (C10) The Holmes Company's currently outstanding bonds have an 5% coupon and a 10% vield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is Holmes' after-tax cost of debt? 19. (10) Pearson Motors has a target capital structure of 90% debt and 70% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 11%, and its tax rate is 25%. Pearson's CFO estimates that the company's WACC is 10.80%. What is Pearson's cost of common equity? . 20. (C10) Firm calculating cost of capital for major expansion program, Tax rate = 40% 10-year, 12% coupon, semiannual payment noncallable bonds sell for $1,153.72. New bonds will be privately placed with no flotation cost. 8%, $100 par value, quarterly dividend, perpetual preferred stock sells for $111.10. Common stock sells for $60. Do = $4.19 and g = 5% b=0.8; r = 7%; RPM = 6%. Bond-Yield Risk Premium = 2%. Target capital structure: 30% debt, 20% preferred, 50% common equity. a) What is the company's after-tax cost of debt? b) What is the company's cost of preferred stock? c) What is the company's cost of common stock, using DDM, CAPM, Bond-yield risk premium approaches respectively? d) What is the company's WACC (assuming using cost of common stock calculated by DDM)

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