The total market value of the company outstanding debt

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1. A corporation just paid a dividend of $4.00 per share on its stock. Dividends are expected to grow at a constant rate of 2 % per year forever. If the stock currently sells for $80 per share, what is the cost of common stock?

2. A firm has a bond issue outstanding with 10 years to maturity that is quoted at 112% of face value. The bonds have a 6% coupon rate and make semiannual coupon payments. If the tax rate is 40%, what is the company’s after-tax cost of debt?

3. A corporation has 8,000 4.0% coupon bonds outstanding, $1000 par value, 20 years to maturity, selling for $1,040. The bonds make semiannual payments. What is the total market value of the company’s outstanding debt?

Reference no: EM132047216

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