AutoSave Off File Home Insert Draw Page Layout Final exam V2 - Protected View Formulas Data Review View Help Search PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing '- Debt: A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 5 percent. A A16 fx A B C D E 1 Problem 2 (2 x 7.5= 15 points) 2 3 4 Frunda Ltd. Is considering an investment in a new factory, for which it needs financing. The firm's balance sheet at the close of 2019 appeared as follows: 5 19 6 Cash $ 450,000 Accounts receivable $ 2,120,000 8 Inventories $ 835,000 Long-term debt $ 5,135,000 Net property, plant, and 9 equipment $ 6,850,000 Common equity 5,120,000 10 Total assets 10,255,000 Total debt and equity $ 10,255,000 11 F G H 12 At present, the firm's common stock is selling for a price equal to 3 times its book-value, while the bonds (long-term debt) was traded 13 14 For the cost of equity and the cost of debt the following information is available: Common stock: the investors require a return of 8%. 15 16 - Debt: A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 5 percent. A new issue would have a flotation cost of 4 percent of the $975 market value. The bonds mature in 20 years. The firm's average tax rate is 15 percent, and its marginal tax rate is 21 percent. 17 18 19 20 21 a) Calculate the after-tax cost of debt 22 b) Calculate the weighted average cost of capital (WACC) 23 24 25 26 27 28 9 ,