Chapter 14
Question 14
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Output Area:
Chapter 14
Question 15
Input Area:
Output Area:
Common stock
Preferred stock outstanding
Chapter 14
Question 16
Input Area:
Output Area:
Market value of equity 289,000,000$
Market value of preferred 22,750,000$
Market value of firm 465,650,000$
WACC should be used as the discount rate.
Aftertax cost of debt 3.94%
Cost of equity 13.38%
Cost of preferred 5.49%
Bonds outstanding 135,000
Settlement date 01/01/00
Maturity date 01/01/15
Annual coupon rate 7.50%
Bond price (% of par) 114
Shares outstanding 8,500,000
Share price 34$
Preferred stock outstanding
Shares outstanding 250,000
Share price 91$
Market risk premium 7.50%
Risk-free rate 4.00%
Tax rate 35%
Chapter 14
Question 17
Input Area:
Project Beta Project E(R)
Output Area:
Firms cost of capital 11%
Market expected return 11%
T-bill rate 4%
Cost 15,000,000$
Debt-equity ratio 0.60
Equity flotation cost 8%
Debt flotation cost 5%
Capital structure:
Flotation cost:
Chapter 14
Question 22
Input Area:
Bond Coupon Rate Price Quote Maturity Face value
Output Area:
Market value Weight
Settlement date 01/01/00 01/01/00 01/01/00 01/01/00
Annual coupon rate 6.00% 7.50% 7.20% 6.80%
Coupons per year 2 2 2 2
Face value (% of par) 105.86 114.52 113.07 102.31
Pretax cost 4.67% 5.25% 5.90% 6.61%
Aftertax cost 3.08% 3.47% 3.90% 4.36%
Pretax cost of debt 5.69%
Tax rate 34%
Payments per year 2
Chapter 14
Question 23
Input Area:
Output Area:
Dividend per share 0.40$
Growth rate 5.0%
Market return 12.0%
T-bill rate 5.5%
Stock price 72.00$
Chapter 14
Question 24
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Output Area:
Chapter 14
Question 25
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Output Area:
Chapter 14
Question 26
Input Area:
Land price 4,500,000$
Current land value 5,300,000$
Land value in 5 years 5,700,000$
Plant & Equipment cost 32,000,000$
Bonds outstanding 230,000
Settlement date 01/01/00
Maturity date 01/01/25
Annual coupon rate 7.20%
Coupons per year 2
Face value (% of par) 100
Bond price (% of par) 108
Common stock
Shares outstanding 8,800,000
Share price 71.00$
Preferred stock outstanding
Shares outstanding 450,000
Coupon rate 5.00%
Share price 81.00$
Market risk premium 7.00%
Risk-free rate 5.00%
Equity floatation cost 8.00%
Preferred floatation cost 6.00%
Debt floatation cost 4.00%
Tax rate 35%
Net working capital 1,300,000$
Does the NWC require
floatation costs (Yes/No) No
Output Area: