BUS_320_Chapter_10_Assignment

BUS_320_Chapter_10_Assignment - BUS 320 Chapter 10...

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BUS 320 Chapter 10 Assignment 1) The Heuser Company’s currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Heuser’s after-tax cost of debt? 2) Tunney Industries can issue perpetual preferred stock at a price of $47.50 a share. The stock would pay a constant annual dividend of $3.80 a share. What is the company’s cost of preferred stock, r p ? 3) Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company’s outstanding bonds is 9%, and its tax rate is 40%. Percy’s CFO estimates that the company’s WACC is 9.96%. What is Percy’s cost of common equity? 4) Javits & Sons’ common stock currently trades at $30 per share. It is expected to pay an annual dividend of $3.00 per share at the end of the year (D1 = $3.00), and the constant growth rate is 5% per year. a)
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BUS_320_Chapter_10_Assignment - BUS 320 Chapter 10...

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