Question: A. Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax

A.

Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 33 percent, what is the aftertax cost of Ying's debt?

Bond

Coupon Rate

Price Quote

Maturity

Face Value

1 5.9% 110 8 years $ 23,000,000
2 7.4 118 11 years 36,000,000
3 6.5 112 26 years 49,000,000
4 7.5 123 40 years 62,000,000

B.

Lannister Manufacturing has a target debt-equity ratio of 0.58. Its cost of equity is 17 percent, and its cost of debt is 9 percent. If the tax rate is 32 percent, what is the company's WACC? C.

Fama's Llamas has a weighted average cost of capital of 13 percent. The company's cost of equity is 17 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 31 percent. What is the company's target debt-equity ratio?

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