1- Triplin Corporation’s marginal tax rate is 35%. It can issue 10-year bonds with an annual coupon rate of 7% and a par value of $1,000. After $12 per bond flotation costs, new bonds will net the company $966 in proceeds. Determine the appropriate after-tax cost of new debt for Triplin to use in a capital budgeting analysis.
2- The __________ is the minimum return required by investors in order to make an investment in the firm.
3- A company has common stock that can be sold for $33.09 per share. The stock paid a dividend at the end of last year of $1.47. Dividends are expected to grow at an annual rate of 8% indefinitely. Flotation costs associated with the sale of stock equal $5.68 per share. What is the corporation’s cost of external equity? Submit your answer as a percentage and round to two decimal places (Ex. 0.00%)
4- Kharnila Corp. is considering the purchase of a new factory and would like to finance the purchase with a combination of debt and equity. The factory will cost $72347 total, of which $18677 will be financed by new common stock. The remainder will be financed by debt. What is the proportion of debt financing for use in the WACC calculation? Submit your answer as a percentage and round to two decimal places (Ex. 0.00%)
5- Jiffy Co. expects to pay a dividend of $4.12 per share in one year. The current price of Jiffy common stock is $30.21 per share. Flotation costs are $3.59 per share when Jiffy issues new stock. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 5 percent indefinitely? Submit your answer as a percentage and round to two decimal places (Ex. 0.00%)
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