18. New Jet Airlines plans to issue 16-year bonds with a par value of $1,000 that...

18. New Jet Airlines plans to issue 16-year bonds with a par value of $1,000 that will pay $40 every six months. The bonds have a market price of $1,340. Flotation costs on new debt will be 7%. If the firm has a 35% marginal tax bracket, what is cost of existing debt?

22. GHJ Inc. is investing in a new project of $16 million. It will raise $4 million of bonds, $4 million of preferred stock, and $8 million of new common stock. If the after-tax cost of debt is 6%, cost of preferred stock is 10%, the cost of retained earnings is 16%, and the cost of new common stock is 19%, what is the WACC?

Solutions

Expert Solution

Use spreadsheet for the required computations. Enter values and formulas in the spreadsheet as shown in the image below.

The obtained result is provided below.

jeff jeffy answered 1 year ago

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