LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 12%….

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Problem 9-2

After-Tax Cost of Debt

LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 12%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is LL’s after-tax cost of debt? Round your answer to two decimal places.

%

Problem 9-5

Cost of Equity: Dividend Growth

Summerdahl Resort’s common stock is currently trading at $38.00 a share. The stock is expected to pay a dividend of $1.50 a share at the end of the year (D1 = $1.50), and the dividend is expected to grow at a constant rate of 8% a year. What is the cost of common equity? Round your answer to two decimal places.

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