A bond that has a $1000 par value (face value)
a. A bond that has a $1000 par value (face value) and a contract or coupon interest rate of 11.2%. The bonds have a current market value of $1,123 and will mature in 10 years. The firm’s marginal tax rate is 34%.The cost of capital from this bond debt ___% (round to two decimal places)b. If the firm’s bonds are not frequently traded, how would you go about determining a cost of debt for this company? Select the best choice1. it is standard practice to estimate the cost of debt using the yield to maturity on a treasury bond of the same time2. it is standard practice to estimate the cost of debt using the yield to maturity on a portfolio of bonds with a similar credit rating and maturity as the firm’s outstanding debt.3. it is standard practice to estimate the cost of debt using the bond’s coupon rate and adjust it to inflation.4. it is standard practice to estimate the cost of debt using the average coupon rate on a portfolio of bonds with a similar credit rating and maturity as the firm’s outstanding debt.c. A new common stock issue that paid $1.79 dividend last year. The par value of the stock is $14, and the firm’s dividends per share have grown at a rate of 7.5% per year. This growth rate is expected to continue into the foreseeable future. The price of this stock is now $27.16.The cost of capital from this common equity is ___% (round to two decimal places)d. A preferred stock paying a 10.3% dividend on a $125par value. The preferred shares are currently selling for $149.99.The cost of the preferred stock is ___%e. A bond selling to yield 13.7% for the purchaser bond of the bond. The borrowing firm faces a tax rate of 34%The cost of capital from this bond debt ___% (round to two decimal places)
