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Chapter 4: Q11-4BP (page 363)
Telecom Systems can issue debt yielding 9 percent. The company is in a 30 percent bracket. What is its aftertax cost of debt?
After tax cost of debt of the company is $0.063.
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Does inflation have anything to do with making a dollar today worth more than a dollar tomorrow?
What is the present value of a. $7,900 in 10 years at 11 percent?
Christy Reed made a \(2,000 deposit in her savings account on her 21st birthday, and she has made another \)2,000 deposit on every birthday since then. Her account earns 7 percent compounded annually. How much will she have in the account after she makes the deposit on her 32nd birthday?
North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 6 percent to 14 percent (yield is the same as required rate of return).
a. What was the original issue price?
b. What is the current value of this preferred stock?
c. If the yield on the Standard & Poor’s Preferred Stock Index declines, how will the price of the preferred stock be affected?
What factors might influence a firm’s price-earnings ratio?
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