1. Using the dividend discount model, what is the cost of equity capital for Zeller Mining if the company will pay a dividend of C$2.30 next year, has a payout ratio of 30%, a return on equity (ROE) of 15%, and a stock price of C$45

1. Using the dividend discount model, what is the cost of equity capital for Zeller Mining if the company will pay a dividend of C$2.30 next year, has a payout ratio of 30%, a return on equity (ROE) of 15%, and a stock price of C$45?
   1. Dot.Com has determined that it could issue $1,000 face value bonds with an 8% coupon

paid semiannually and a five-year maturity at $900 per bond. If Dot.Com’s marginal tax rate is 38%, its after-tax cost of debt is?

1. Morgan Insurance Ltd. issued a fixed-rate perpetual preferred stock three years ago and

placed it privately with institutional investors. The stock was issued at $25 per share with a $1.75 dividend. If the company were to issue preferred stock today, the yield would be 6.5%. The stock’s current value is:

1. Fran McClure of Alba Advisers is estimating the cost of capital of Frontier Corporation as part of her valuation analysis of Frontier. McClure will be using this estimate, along with projected cash flows from Frontier’s new projects, to estimate the effect of these new projects on the value of Frontier. McClure has gathered the following information on Frontier Corporation:

The weights that McClure should apply in estimating Frontier’s cost of capital for debt and equity are, respectively:

1. Trumpit Resorts Company currently has 1.2 million common shares of stock out- standing and the stock has a beta of 2.2. It also has $10 million face value of bonds that have five years remaining to maturity and 8% coupon with semiannual payments, and are priced to yield 13.65%. If Trumpit issues up to $2.5 million of new bonds, the bonds will be priced at par and have a yield of 13.65%; if it issues bonds beyond $2.5 million, the expected yield on the entire issuance will be 16%. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3% and the expected market return is 10%. Trumpit’s marginal tax rate is 30%. If Trumpit raises $7.5 million of new capital while maintaining the same debt-to-equity ratio, its weighted average cost of capital is?