Thurman Industries plans to issue a $100 par perpetual preferred stock with a fixed annual dividend of 12 percent of par.  It would sell for $90.00, but flotation costs would be 5 percent of the market price.  What is the percentage cost of preferred stock after taking flotation costs into account?

Thurman Industries plans to issue a $100 par perpetual preferred stock with a fixed annual dividend of 8 percent of par.  It would sell for $107.20, but flotation costs would be 5 percent of the market price.  What is the percentage cost of preferred stock after taking flotation costs into account?

If a firm’s beta is 1.6, the risk-free rate is 4.5%, and the expected return on the market is 10.5%, what will be the firm’s cost of equity using the CAPM approach?

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$9,000 $3,100 $3,400 $3,800 $3,100 Calculate the project’s payback period.

Given the following information on the project’s net operating working capital,  the cash flow of year 1 due to investments in net operating working capital is________? Time        NOWC 0            21.37 1            30.05 2            31.61 3            20.00

The Crabtree Company’s cost of common equity is 15 percent, its before-tax cost of debt is 11 percent, and its marginal tax rate is 45 percent.  Given Crabtree’s market value capital structure below, calculate its WACC. Long-term debt $12,000,000 Common equity   18,000,000 Total capital $30,000,000

The Schenk Company’s currently outstanding bonds have a 13.2 percent coupon and a 6.4 percent yield to maturity.  Schenk believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 45 percent, what is Schenk’s after-tax cost of debt?

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$13,000 $5,500 $4,700 $4,000 $5,500 Calculate the project’s profitability index (PI).

Bergeron Microcomputers is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $2 million 14.5% High Y   4 million 13.5% Average Z   7 million   8.5% Low Bergeron’s WACC is 12 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Bergeron accept assuming it faces no capital constraints?

Li & Associates’ common stock currently trades at $55 a share.  It is expected to pay an annual dividend of $2.75 a share at the end of the year (D1 = $2.75), and the constant growth rate is 8.3 percent a year.  What is the company’s cost of common equity if all of its equity comes from retained earnings?