a. A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 8

percent. A new issue would have a floatation cost of 9 percent of the $1,145 market value. The bonds mature in 6

years. The firm's average tax rate is 30 percent and its marginal tax rate is 25 percent.

b. A new common stock issue that paid a $1.60 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 7 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $26, but 9 percent flotation costs are anticipated.

c. Internal common equity when the current market price of the common stock is $43. The expected dividend this coming year should be $3.50, increasing thereafter at an annual growth rate of 11 percent. The corporation's tax rate is 25 percent.

d. A preferred stock paying a dividend of 9 percent on a $100 par value. If a new issue is offered, flotation costs will be 15 percent of the current price of

$166.