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The Saunders Company has the following financing outstanding

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The Saunders Company has the following financing outstanding. Debt: 100,000 bonds with a coupon rate of 6 percent and a current price quote of 108 percent of par value; the bonds have 20 years to maturity; the par value is $1,000. Preferred stock: 190,000 shares of 4 percent preferred stock with a current price of $72, and a par value of $100. Common stock: 3,000,000 shares of common stock; the current price is $58, and the beta of the stock is 1.15. Market: The corporate tax rate is 30 percent, the market risk premium is 5 percent, and the risk free rate is 2 percent. 19. What is the cost of debt for Saunders? 20. What is the cost of preferred stock for the firm? 21. What is the cost of common stock for the firm? 22. What is the company’s WACC? 23. Consider an asset that costs $810,000 and is depreciated straight line to zero over its nine year tax life. The asset is to be used in a five year project; at the end of the project, the asset can be sold for $185,000. If the relevant tax rate is 30 percent, what is the after tax cash flow from the sale of this asset? 24. A firm's financial statements for the current year are as follows (in millions of dollars). Balance Sheet Assets Liabilities and Equity Cash $0.5 Accounts Payable Accounts Receivable 0.7 Accrued Liabilities Inventory 0.4 Notes Payable $0.4 0.2 0.3 Current Assets 1.6 Current Liabilities 0.9 Net Fixed Assets 2.5 1.7 Long-term Debt Common Equity Total 4.1 Total 1.5 4.1 Income Statement Sales Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expenses Earnings before Taxes Income Taxes Net Income $ 10.0 6.6 3.4 2.1 1.3 0.3 1.0 0.4 0.6 The management believes that sales will increase by 20 percent next year. The dividend payout ratio (Dividends / Net income) is targeted at 30 percent. The tax rate is 40%. The firm is operating at its full capacity, and therefore it will have to increase its fixed asset accordingly. What is the additional funding requirement for the next year (after the first step of financial planning)? 25. In the above question, what if the company has a more than enough capacity? How much external fund will be required if the company does not have to increase its fixed asset (after the first step of financial planning)?