QUESTION 11 Peter's Audio has a yield to maturity on its debt of 7.8 percent, a...

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QUESTION 11 Peter's Audio has a yield to maturity on its debt of 7.8 percent, a cost of equity of 12.4 percent, and a cost of preferred stock of 8 percent. The firm has 105 shares of common stock outstanding at a market price of $22 a share. There are 25 shares of preferred stock outstanding at a market price of $45 a share. The bond issue has a total face value of $1,500 and sells at 98 percent of face value. If the tax rate is 21 percent, what is the weighted average cost of capital assuming all interest is tax deductible? 8.69 percent 9.45 percent 9.52 percent 8.54 percent 9.68 percent QUESTION 27 If a stock price follows a random walk, the price today is said to be equal to the prior period price plus the expected return for the period with any remaining difference from the actual return considered to be: related to the security's risk. related to the risk-free rate. a predictable amount based on the past prices. an overall market abnormality. O due to new information related to the stock. QUESTION 31 The Jolly Jordan Company has the following capital structure that it considers optimal: Debt = 40% Preferred Stock = 10% Common Stock = 50% The firm plans to spend $100,000,000 on new capital projects. The firm has one bond issue outstanding with 10 years to maturity, semiannual payments, coupon rate of 8%, face value of $1,000 per bond and a current price of $1,100. The firm's marginal tax rate is 40%. Preferred stock can be sold with a dividend of $2.75, a par value of $25.00, and a floatation cost of $2.00 per share. Common stock is presently selling at $35.00 per share and new shares can be issued with a $3.00 per share floatation cost. The last dividend paid was $4.00 and the firm expects to grow at a rate of 4% in the foreseeable future. Calculate the firm's net cost of debt. a. 1.99% b. 4.80% O C. 3.97% d. 6.62% e. None of these are correct QUESTION 11 Peter's Audio has a yield to maturity on its debt of 7.8 percent, a cost of equity of 12.4 percent, and a cost of preferred stock of 8 percent. The firm has 105 shares of common stock outstanding at a market price of $22 a share. There are 25 shares of preferred stock outstanding at a market price of $45 a share. The bond issue has a total face value of $1,500 and sells at 98 percent of face value. If the tax rate is 21 percent, what is the weighted average cost of capital assuming all interest is tax deductible? 8.69 percent 9.45 percent 9.52 percent 8.54 percent 9.68 percent QUESTION 27 If a stock price follows a random walk, the price today is said to be equal to the prior period price plus the expected return for the period with any remaining difference from the actual return considered to be: related to the security's risk. related to the risk-free rate. a predictable amount based on the past prices. an overall market abnormality. O due to new information related to the stock. QUESTION 31 The Jolly Jordan Company has the following capital structure that it considers optimal: Debt = 40% Preferred Stock = 10% Common Stock = 50% The firm plans to spend $100,000,000 on new capital projects. The firm has one bond issue outstanding with 10 years to maturity, semiannual payments, coupon rate of 8%, face value of $1,000 per bond and a current price of $1,100. The firm's marginal tax rate is 40%. Preferred stock can be sold with a dividend of $2.75, a par value of $25.00, and a floatation cost of $2.00 per share. Common stock is presently selling at $35.00 per share and new shares can be issued with a $3.00 per share floatation cost. The last dividend paid was $4.00 and the firm expects to grow at a rate of 4% in the foreseeable future. Calculate the firm's net cost of debt. a. 1.99% b. 4.80% O C. 3.97% d. 6.62% e. None of these are correct

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