# After Tax Cost of Capital Assignment | Homework For You

1. (10).Lucy Inc. has a bond with a \$1,000 face value, and a coupon rate of 10%. A new issue would have a flotation cost of 5% of the \$1,125 market value. The bond will mature in 40 years. Lucy’s marginal tax rate is 34%. What is the approximate after tax cost of this capital?
1.    6.1%
2.    7.1%
3.    8.1%
4.    9.1%
1. (11) The common stock of Lucy Inc. sells for \$27.50 per share. If a new issue was to be sold the flotation costs would be 5%. Last year’s dividend was \$1.80 and the anticipated growth for Lucy Inc. is 7%. What is the approximate cost of this anticipated new common stock?

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1.    7.4%
2. 14.4%
3. 18.4%
4. 21.4%
1. (12) Lucy Inc. issued new preferred stock paying a 9% dividend on a \$300.00 par value. The flotation costs will be 12% of the current price of \$175.00. What is the cost of this capital?
1. 12.5%
2. 14.5%
3. 17.5%
4. 19.5%

13. The amount of capital held by Lucy Inc. is: Bonds \$6,000,000, Common Stock-new of \$9,600,000 and Preferred Stock of \$8,400,000. Using the answers to Questions 10, 11, and 12 above what is the approximate weighted average cost of capital for Lucy Inc.?

a) 10.4%

b) 11.4%

c) 12.4%

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d) 13.4%. Get Finance homework help today

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