(i) Describe and interpret the assumptions related to the problem.
(ii) Apply the appropriate mathematical model to solve the problem.
(iii) Calculate the correct solution to the problem provide calcualtions done on excel
1. APR Company's preferred stock is currently selling for $24.00, and pays a perpetual annual dividend of $2.80 per share. New issue of preferred stock would have $4 per share in flotation costs. The firm's tax rate is 40%. Compute the cost of new preferred stock.
2. ABC Corp. is undergoing a major expansion. The expansion will be financed by issuing new 12-year, $1,000 par, 9.5% annual coupon bonds. The market price of the bondsis $1,125 each. Flotation expense on the new bonds will be $50 per bond. The marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?