Q6. If a firm’s before-tax cost of debt is 10% and the firm has a 10% marginal...

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Finance

Q6.
If a firm’s before-tax cost of debt is 10% and the firm has a10% marginal tax rate, what is the firm’s after-tax cost ofdebt?
6.5%
3.5%
9.0%
7.9%
Q7.
A company has preferred stock that can be sold for $100 pershare. The preferred stock pays an annual dividend $6. Therefore,the cost of preferred stock is:
4.0%
5.0%
6.0%
10.0%
Q8.
Suppose your company has an equity beta of 1.5 and the currentrisk-free rate is 3.0%. If the expected market risk premium is8.0%, what is your cost of equity capital?
12.3%
13.0%
11.1%
15.0%.
Q9.
A stock sells for $20 per share, its last dividend(D₀) was $1.00, and its growth rate is a constant 6%.What is its cost of common stock?
5.3%
11.0%
11.3%
11.6%
Q10.
A firm has a target capital structure of 30% debt, 20% preferredstock, and 50% common equity. The company's after-tax cost of debtis 5%, its cost of preferred stock is 8%, and its cost of retainedearnings is 12%. The firm’s marginal tax rate is 21%. What is thecompany's weighted average cost of capital if retained earnings areused to fund the common equity portion?
8.0%
9.50%
9.10%
8.79%

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Solution to Question6 Aftertax Cost of Debt Beforetax Cost of Debt x 1 Tax Rate 10 x 1 010 10 x 090 90 Solution to Question7 Cost of Preferred Stock Annual Preferred Dividend Current selling price per See Answer

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Q6.If a firm’s before-tax cost of debt is 10% and the firm has a10% marginal tax rate, what is the firm’s after-tax cost ofdebt?6.5%3.5%9.0%7.9%Q7.A company has preferred stock that can be sold for $100 pershare. The preferred stock pays an annual dividend $6. Therefore,the cost of preferred stock is:4.0%5.0%6.0%10.0%Q8.Suppose your company has an equity beta of 1.5 and the currentrisk-free rate is 3.0%. If the expected market risk premium is8.0%, what is your cost of equity capital?12.3%13.0%11.1%15.0%.Q9.A stock sells for $20 per share, its last dividend(D0) was $1.00, and its growth rate is a constant 6%.What is its cost of common stock?5.3%11.0%11.3%11.6%Q10.A firm has a target capital structure of 30% debt, 20% preferredstock, and 50% common equity. The company's after-tax cost of debtis 5%, its cost of preferred stock is 8%, and its cost of retainedearnings is 12%. The firm’s marginal tax rate is 21%. What is thecompany's weighted average cost of capital if retained earnings areused to fund the common equity portion?8.0%9.50%9.10%8.79%