Chapter 6
Interest Rates
Solutions to End-of-Chapter Problems
6-1
a.
Term
6 months
1 year
2 years
3 years
4 years
5 years
10 years
20 years
30 years
Rate
5.1%
5.5
5.6
5.7
5.8
6.0
6.1
6.5
6.3
Interest Rate
(%)
Years to Maturity
b. The yield curve shown is

Chapter 3
Financial Statements, Cash Flow, and Taxes
Solutions to End-of-Chapter Problems
3-1
NI = $3,000,000; EBIT = $6,000,000; T = 40%; Interest = ?
Need to set up an income statement and work from the bottom up.
EBIT
Interest
EBT
Taxes (40%)
NI
$6,000

Chapter 10
The Cost of Capital
Solutions to End-Of-Chapter Problems
10-1
rd(1 T) = 0.12(0.65) = 7.80%.
10-2
Pp = $47.50; Dp = $3.80; rp = ?
rp =
10-3
Dp
Pp
=
$3.80
= 8%.
$47 50
.
40% Debt; 60% Common equity; r d = 9%; T = 40%; WACC = 9.96%; r s = ?
WACC =