Question: 5 Gamma Bank has an issue of preferred stock with a stated dividend of $6.25 that just sold for $103 per share. What is Gamma

5 Gamma Bank has an issue of preferred stock with a stated dividend of $6.25 that just
sold for $103 per share.
What is Gamma Bank's cost of preferred stock?
a Kpf = 5.73%
b Kpf = 6.07%
c Kpf = 10.12%
d Kpf = 8.07%
Preferred Dividend
Price of stock
Cost of Preferred Stock
6 Theta Corp. issued a 20-year, 8 percent semiannual bond.
The bond has a par value of $1,000
The bond currently sells for $1086.
The companys tax rate is 25 percent.
Solve for the before tax cost of debt through Goal Seek.
What is the aftertax cost of debt for Theta Corp.?
a Kd = 3.59%
b Kd = 5.39%
c Kd = 10.15%
d Kd = 7.18%
Cost of Debt
Maturity
Semiannual Maturity
coupon rate
semiannual compound
Par Value
Price of Bond
Semiannual Payments
PVIF
PVIFA
YTM or Cost of Debt
Prove the Price of Bond
Annual YTM or Cost of Capital
Tax Rate
After-tax Cost of Debt

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