Question: 1. Falcon Technologies is issuing new common stock. Using information below, what is Falcons cost of equity? Market price of $28. Dividends last year were

1. Falcon Technologies is issuing new common stock. Using information below, what is Falcons cost of equity?

Market price of $28.

Dividends last year were $1.30 and are expected to grow at an annual rate of 7% forever.

Flotation costs will be 6% of market price.

2. Tea-Time Travel wishes to offer a $1,000 bond that pays 8% annual interest and matures in 15 years. Using information provided, what will be the firms after-tax cost of debt on the bond?

Investors are willing to pay $950 for the bond.

Flotation costs will be 11% of market value.

The company is in a 19% tax bracket.

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