1. The Cherished Cat's cost of equity is 13 percent and its after-tax cost of debt is 4.20 percent. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.80 and the tax rate is 30 percent?

2. Bowtie, Inc. has a cost of equity of 15.7 percent, a pre-tax cost of debt of 6.70 percent, and a tax rate of 34 percent. What is the firm's weighted average cost of capital if the debt-equity ratio is 1.50?

3. Deep Sea Fishing issues only common stock and coupon bonds. The firm has a debt-equity ratio equal to 0.60. The cost of equity is 13.7 percent and the pre-tax cost of debt is 9.4 percent. The tax rate is 35 percent. What is the weighted average cost of the firm's capital?

4. The preferred stock of New Beverages is selling for $39 a share. The dividend rate is 8.0 percent annually and the par value per share is $100. What is the firm's cost of preferred stock if the tax rate is 35 percent?

5. Last week, Lester's Electronics paid an annual dividend of $2.10 on its common stock. The company has a longstanding policy of increasing its dividend by 3 percent annually. This policy is expected to continue. What is the firm's cost of equity if the stock is currently selling for $44.60 a share?

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1. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.80? The Weighted Average Cost of... View the full answer