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Unformatted text preview: Chapter 9b 1. ConoNet firm has the option to issue 15 year bonds at $1180 with a flotation cost of 7%, and a coupon rate of 6%. What is ConoNet firms cost of debt? 2. ConoNet firm can issue preferred stock at a price of $43.37 per share that pays a 10% dividend on a $30 par value. The flotation cost of issuing preferred stock is 13%. What is ConoNet firms cost of preferred stock? 3. ConoNet firm can also issue common stock at a price of $67.75. The floating cost of preferred stock is 17%. ConoNet firm recently paid a dividend of $12 has a growth rate of 5%. What is ConoNet firms cost of common stock? 4. (Use the information from 1-3) ConoNet firm decides to finance itself by issuing 1000 bonds, 15,000 shares of preferred stock, and 13,000 shares of common stock. Assuming this represents all of ConoNet firms financing, calculate the firms after-tax WACC(assume a tax rate of 34%). 5. Great Minds Inc. has a target capital structure of 45% debt, 35% preferred stock, and 20% Common Stock. The costs of debt, preferred stock, and common stock are 7%, 9%, 15%...
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