The steel company has consulted with its investment bank about the cost of a new

placement of shares that is estimated at 10%. If the income tax rate is 40%, what is
the cost of the debt after taxes?
0.10 * (1 - 0.40) = 0.06 6+%

Springbox is evaluating its cost of capital and considers different financing

alternatives. It expects to issue new debt at 10% and preferred stock with a dividend
of $ 5 to $ 50 per share. Common stock sells at $ 20 and pays a dividend of $ 2.5 next
year. A 5% annual dividend growth is forecast. The tax rate is 40%. What is the wacc
taking into account 30% financed debt ratio, 10% financed proportion of preferred
shares and 60% funded proportion of capital?
0.10 * (1 – 0.40) * 0.30 + (5/50) * 0.10 + (2.5/20 + 0.05) * 0.60 = 13,30%

Lucila garden shares have a beta of 1.4 The market risk premium is 7% and the risk
free rate is 6%. The reason debt assets is 50%, its cost of debt before taxes is 10%
and the tax rate is 35%. What is the wacc?
(0.06 + 0.07) * 1.4 = 0.158
0.10 * (1 – 0.35) * 0.50 + 0.158 * 0.50 = 11.15%
Valle del Rio has established a target capital structure of 45% in debt and 55% in
common stock. Its cost of capital in common stock is 18% and its cost of debt is 9%
and the tax rate is 35%. What is the wacc?

0.09 * (1 – 0.35) * 0.45 + 0.18 * 0.55 =12.53%

Telemaxis communications in the next 12 months expects to pay dividends of $ 2.50

per share and the current price of common shares is $ 50 per share. The expected
growth rate is 8% A) calculate the percentage of retained earnings B) If the floating
cost is $ 3, calculate the cost of new common shares.
a) (2.50/50) + 0.08 = 13%
b) (2.50 / 50 - 3) + 0.08 = 13.32%
Calculate the current value of the tax savings for interest generated with income tax
of 40%
A) a 1 year loan of $ 2,000,000 to 10%.
B) a 1 year loan of $ 2,000,000 to 10%, which is not repaid principal until
maturity.

a) 2.000.000 * 0.10 * 0.40/1.10 = 72.727.27

b) As interest totals 200,000 per year, save $ 80,000 (200,000 x 40%) for 5 years than
updated to 10%, a current value of:
80.000 x (1.10)[5] - 1 = 303.262.94
(1.10)[5] * 0.10