answer #5

5. Suppose MAM's capital structure is 30% debt, 10% preferred stock and 60% equity. Assume all other data as presented in the previous problems (use the average cost of the two methods for Re): compute the WACC. 4. MAM Industries has a preferred stock issue outstanding which pays an annual dividend of $3.25 per share and currently has a market price of $25 per share. Compute the cost of preferred stock. 1. Suppose Today is January 1, 2010. MAM industries issued a 30 year bond with a 9% annual coupon and a $1.000 face value, payable on January 1, 2030. The bond now sells for $915. Use this bond to determine the firm's after-tax cost of debt. Assume a 34% tax rate. 2. MAM Industries just declared a dividend of $3.50 per share on common stock. The current stock price is $25 per share and the dividend is expected to increase at a rate of 4% per year for the foreseeable future. Use the dividend growth model to compute the cost of equity capital 3. Suppose the market risk premium is 8.5%, the risk-free rate is 7% and MAM Industries has a beta of 1.35. Use the SML to compute the firm's cost of equity capital 4. MAM Industries has a preferred stock issue outstanding which pays an annual dividend of $3.25 per share and currently has a market price of $25 per share. Compute the cost of preferred stock. Suppose MAM's capital structure is 30% debt, 10% preferred stock and 60% equity. Assume all other data as presented in the previous problems (use the average cost of the two methods for Re): compute the WACC