a) Shi Import-Export's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $638.11. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.)
b) Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 35%, rd = 8%, rps = 7.7%, and rs = 11%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places. %
c) Suppose Shi Import-Export's will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%. If the flotation cost is 3% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places. %