20 years remain until the maturity of a bond that Crosscurre…

20 years remain until the maturity of a bond that Crosscurrent Resolutions, Co. sold some time ago. It has a $1,000 par value, is non-callable and pays a 7.00% annual coupon semiannually. The bond currently sells for $925 and the company’s tax rate is 40%. What is the current component cost of debt for use in the WACC calculation?

LCQ, Inc. is considering selling a 25-year non-callable bond…

LCQ, Inc. is considering selling a 25-year non-callable bond priced at its $1,000–par value with a 7.50% annual coupon, paid semiannually. The company’s marginal tax rate is 35.00%, but Congress is considering a change in the corporate tax rate to 40.00%. By how much would the component cost of debt used to calculate the WACC change if the new tax rate were to be adopted?

Harvey’s Industrial Plumbing Supply’s target capital structu…

Harvey’s Industrial Plumbing Supply’s target capital structure consists of 40% debt and 60% equity. Its capital budget this year is forecast to be $650,000. It also wants to pay a dividend of $225,000. If the company follows the residual dividend policy, how much net income must it earn to meet its capital requirements, pay the dividend, and keep the capital structure in balance?

The CEO of Harding Media Inc. has asked you to help estimate…

The CEO of Harding Media Inc. has asked you to help estimate its cost of common equity. You have obtained the following data: current dividend, D0 = $0.85; current stock price, P0 = $22.00; and growth rate g = 6.00% (constant). The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $40.00. Based on the dividend growth model, by how much would the cost of common change if the stock price changes as the CEO expects?