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The Rodman Company’s currently outstanding bonds have a 12.5 percent coupon and a 7.7 percent yield to maturity.  Rodman believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 45 percent, what is Rodman’s after-tax cost of debt?

The Bettencourt Company’s currently outstanding bonds have a 7.8 percent coupon and a 9.1 percent yield to maturity.  Bettencourt believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 25 percent, what is Bettencourt’s after-tax cost of debt?

A firm with a 13.5 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$12,000 $4,100 $3,800 $5,900 Project Y: -$9,000 $4,900 $4,100 $3,700 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$10,000 $3,800 $3,700 $3,900 $4,200 Calculate the project’s internal rate of return (IRR).

A firm with a 9 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$9,000 $3,100 $3,400 $3,800 $3,100 Calculate the project’s payback period.

If a firm’s beta is 1.3, the risk-free rate is 4.5%, and the expected return on the market is 12.5%, what will be the firm’s cost of equity using the CAPM approach?

A firm with a 13.5 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$4,000 $2,000 $1,300 $2,100 Project Y: -$4,000 $1,500 $1,400 $2,100 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$15,000 $5,300 $5,100 $6,300 $6,300 Calculate the project’s discounted payback period.

A firm with a 10 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$5,000 $2,100 $2,300 $2,500 $2,400 Calculate the project’s profitability index (PI).

A firm with a 10.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$5,000 $1,800 $2,400 $2,300 $2,300 Calculate the project’s internal rate of return (IRR).