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Module 5 Worksheet—Chapter 9 Cost of Capital – Complete in Excel. Please - no rounding. 1....

Module 5 Worksheet—Chapter 9 Cost of Capital – Complete in Excel. Please - no rounding.
1. Calculate the after-tax cost of the debt under each of the following conditions:
a. rd of 14%, tax rate of 15%
b. rd of 14%, tax rate of 30%
c. rd of 14%, tax rate of 45%
2. LL Inc.’s currently outstanding 15% coupon bonds have a yield to maturity of 7.5%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 28%, what is LL’s after tax cost of debt?
3. Burnwood Tech plans to issue some $115 par preferred stock with a 15% dividend. A similar stock is selling on the market for $137. Burnwood must pay flotation costs of 6% of the issue price. What is the cost of the preferred stock?

please complete in excel
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Answer #1

After tax cost of debt = Rd*(1-Tax rate)

Cost of preferred stock = Annual dividend / price after flotation

Q1 After tax cost
a 11.9000%
b 9.8000%
c 7.7000%
Q2 5.4000%
Q3 13.3949%

WORKINGS

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