Question

Questions 46 through 49 are based on the following information: Phillips Equipment has the following financial...

Questions 46 through 49 are based on the following information: Phillips Equipment has the following financial information: Debt: 80,000 bonds that are selling at 102 ($1020 each); the bonds are 8.5% semi-annual 30-year bonds and were issued five years ago. Preferred Stock: 750,000 shares pay a $7.00 annual dividend per share of the preferred stock with a price of $65 per share. Common Stock: 2.5 million shares of common stock with a current price of $42 per share; the beta of the stock is 1.34; the standard deviation of the stock is 10.5%. Market: The US Treasury bill is yielding 2.8% and the expected return on the market is 11.2%. The corporate tax rate is 38%. What is the firm's pretax cost of debt?

4.15%

8.31%

8.50%

8.24%

8.52%

What is the firm's cost of equity?

8.71%

14.51%

15.01%

17.81%

14.06%

What is the firm's cost of preferred stock?

4.3%

4.6%

6.6%

7.0%

10.8%

What is the firm's WACC?

9.8%

10.3%

11.0%

11.4%

12.7%

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