3. Iron Maiden Foundry is considering repurchasing some of its out- standing debt. Its bond matures in 15 years; has an 8% coupon paid semi-annually & $1,000 par. The yield-to-maturity of 15-year US Govt. bonds is 4.5%. Iron Maiden Foundry's credit rating is BBB+. The credit spread of BBB+ rated debt is 1.50%. (10 pts) a. Use the spread method to determine Iron Maiden's pre-tax cost of debt. (3 pts) 4.5%+1.5% 6% b. What is the price of Iron Maiden's bond issue? (7 pts) I X ADA- l AaBb AaBbC( AaBb 1 Normal 1 No Spac... Heading 1 Headir Paragraph 4. Circle True or False for each statement below. (24 pts) Styles True False A) In a world where interest expense is tax deductuble, a firm's capital structure is irrelevent meaning that WACC is constant for all levels of D/E True False B) WACC reflects the required return on a firm's assets True False C) If interest expense is tax deductible, a new asset is created that is the present value of the interest tax shield. This asset is a wealth transfer from the Federal Government (IRS) to the company's shareholders. True False D) The cost of equity (r.) increases with increasing D/E due to greater financial risk associated with higher leverage. True False E) In a world where interest expense is tax deductibile and bankruptcy costs are significant, there exists an optimal capital structure that maximizes the value of the firm. True False F) Beta reflects ONLY the business risk of a firm. True False G) A firm's cost of equity capital depends ONLY on the firm's financial risk. True False H) WACC is the all-in cost of a firm's financing