Compute the approximate cost of new common stock

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Q1. The coupon rate on an issue of debt is 12%. The yield to maturity on this issue is 10%. The corporate tax rate is 38%. What would be the approximate after-tax cost of debt for a new issue of bonds?

Q2. The coupon rate on a debt issue is 6%. If the yield to maturity on the debt is 9%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 40%?

Q3. A firm's stock is selling for $71. The next annual dividend is expected to be $3.00. The growth rate is 12%. The flotation cost is $6. What is the cost of retained earnings?

Q4. Expected cash dividends are $3.00, the dividend yield is 9%, flotation costs are 3% of price, and the growth rate is 4%. Compute the approximate cost of new common stock?

Q5. A firm is paying an annual dividend of $8.00 for its preferred stock which is selling for $67.00. There is a selling cost of $4.00. What is the after-tax cost of preferred stock if the firm's tax rate is 35%?

Reference no: EM133063862

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