# FIN 5080 Quiz 6EC Essay

Words: 1306
Pages: 6

Question 1
1 out of 1 points

The 8 percent annual coupon bonds of the ABC Co. are selling for \$880.76. The bonds mature in 10 years. The bonds have a par value of \$1,000 and payments are made semi-annually? What is the before-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

9.91
9.91
0.05 (9.86 - 9.96)

Response Feedback:
NPER = 10* 2
RATE = ? * 2 = Answer = 4.953 * 2 = 9.91%
PV = -880.76
PMT = 1000 * 8%/2 = 40
FV = 1000

Question 2
1 out of 1 points

ABC Industries will pay a dividend of \$1 next year on their common stock. The company predicts that the dividend will increase by 5 percent each
18.29
18.29 ± 0.5%

Response Feedback:
MV of Common Stock = common shares outstanding * share price
MV of Preferred Stock = preferred shares outstanding * share price
MV of Bonds = bonds outstanding * bond price
Weight of Preferred stock in capital structure = MV of Pref Stock/ (MV of Common Stock + MV of Pref Stock + MV of Bonds)

Question 11
1 out of 1 points

The 8 percent annual coupon bonds of the ABC Co. are selling for \$1,080.69. The bonds mature in 10 years. The bonds have a par value of \$1,000. What is the before-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box.

6.86
6.86
0.05 (6.81 - 6.91)

Response Feedback:
NPER = 10
RATE = ? = Answer = 6.86
PV = -1080.69
PMT = 1000 * 8% = 80
FV = 1000

Question 12
1 out of 1 points

Several years ago, the ABC Company sold a \$1,000 par value bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for \$925 and the company’s tax rate is 40%. What is the after-tax cost of debt?

4.65