A

$1,000

par value bond with a market price of

$980

and a coupon interest rate of

9

percent. Flotation costs for a new issue would be approximately

8

percent. The bonds mature in

8

years and the corporate tax rate is

24

percent.

b. A preferred stock selling for

$118

with an annual dividend payment of

$8.

The flotation cost will be

$8

per share. The company's marginal tax rate is

24

percent.

c. Retained earnings totaling

$4.8

million. The price of the common stock is

$ $73

per share, and dividend per share was

$9.35

last year. The dividend is not expected to change in the future.

d. New common stock for which the most recent dividend was

$2.93.

The company's dividends per share should continue to increase at a growth rate of

7

percent into the indefinite future. The market price of the stock is currently

$48;

however, flotation costs of

$6

per share are expected if the new stock is issued.