1)Zeta Corporation, a major hardware manufacturer, is contemplating selling $8 million worth of 10-year, 13% coupon bonds with a par value of $1,000

1)Zeta Corporation, a major hardware manufacturer, is contemplating selling $8 million worth of 10-year, 13% coupon bonds with a par value of $1,000. Because current market interest rates are greater than 13%, the firm must sell the bonds at $925. Flotation costs are 5% or $50

a. 15.5%

b. 19.4% c.

13.0%

d. None of the above

2. Zeta Corporation, a major hardware manufacturer, is contemplating selling $8 million worth of 10-year, 13% coupon bonds with a par value of $1,000. Because current market interest rates are greater than 13%, the firm must sell the bonds at $925. Flotation costs are 5% or $50.

3. Zeta Corporation has a 35% tax rate. Using the before-tax debt cost calculated above, find an after-tax cost of debt. ri = rd x (1-T)

a. 10 %

b. 5.43 %

c. 12.6 %

d. None of the above

4. Zeta Corporation is contemplating the release of a 10% preferred stock that is expected to sell for its $175-per share value. The cost of issuing and selling the stock is expected to be $25 per share. What is the cost of issuing preferred stock? Rp = Dp/Np

a.10 %

b. 12 %

c. 14 %

d. None of the above

5. Zeta Corporation wishes to determine its cost of common stock equity. The market price of its common stock is $75 per share. The firm expects to pay a dividend of $9.00 at the end of the coming year, 2013 and has a growth rate of 2.5%. What is the cost of selling some of its available common stock? rn = (D1/Nn) + g

a. 12%

b. 15 %

c. 3 %

d. None of the above