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81.
Justice, Inc. has a capital structure which is based on 30 percent debt, 5
percent preferred stock, and 65 percent common stock. The flotation costs
are 11 percent for common stock, 10 percent for preferred stock, and 7
percent for debt. The corporate tax rate is 37 percent. What is the weighted
average flotation cost?
82.
The Daily Brew has a debt-equity ratio of 0.64. The firm is analyzing a new
project which requires an initial cash outlay of $420,000 for equipment. The
flotation cost is 9.6 percent for equity and 5.4 percent for debt. What is the
initial cost of the project including the flotation costs?
83.
You are evaluating a project which requires $230,000 in external financing.
The flotation cost of equity is 11.6 percent and the flotation cost of debt is
5.4 percent. What is the initial cost of the project including the flotation
costs if you maintain a debt-equity ratio of 0.45?
84.
Western Wear is considering a project that requires an initial investment of
$274,000. The firm maintains a debt-equity ratio of 0.40 and has a flotation
cost of debt of 8 percent and a flotation cost of equity of 10.5 percent. The
firm has sufficient internally generated equity to cover the equity portion of
this project. What is the initial cost of the project including the flotation
costs?
85.
Yesteryear Productions is considering a project with an initial start up cost
of $960,000. The firm maintains a debt-equity ratio of 0.50 and has a
flotation cost of debt of 6.8 percent and a flotation cost of equity of 11.4
percent. The firm has sufficient internally generated equity to cover the
equity cost of this project. What is the initial cost of the project including
the flotation costs?
86.
The City Street Corporation's common stock has a beta of 1.2. The risk-free
rate is 3.5 percent and the expected return on the market is 13 percent.
What is the firm's cost of equity?
87.
Stock in Country Road Industries has a beta of 0.97. The market risk
premium is 10 percent while T-bills are currently yielding 5.5 percent.
Country Road's most recent dividend was $1.55 per share, and dividends
are expected to grow at a 7 percent annual rate indefinitely. The stock sells
for $32 a share. What is the estimated cost of equity using the average of
the CAPM approach and the dividend discount approach?
88.
Holdup Bank has an issue of preferred stock with a $5 stated dividend that
just sold for $92 per share. What is the bank's cost of preferred?
89.
Decline, Inc. is trying to determine its cost of debt. The firm has a debt
issue outstanding with 15 years to maturity that is quoted at 107 percent of
face value. The issue makes semiannual payments and has an embedded
cost of 9 percent annually. What is the aftertax cost of debt if the tax rate is
39 percent?
90.
Jiminy's Cricket Farm issued a 30-year, 8 percent, semiannual bond 6 years
ago. The bond currently sells for 114 percent of its face value. What is the
aftertax cost of debt if the company's tax rate is 31 percent?
91.
Mullineaux Corporation has a target capital structure of 41 percent common
stock, 4 percent preferred stock, and 55 percent debt. Its cost of equity is 18
percent, the cost of preferred stock is 6.5 percent, and the pre-tax cost of
debt is 8.5 percent. What is the firm's WACC given a tax rate of 39 percent?
