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## 4. Husky Enterprises recently sold an issue of 10-year maturity bonds. The bonds were sold at a deep discount price of \$615 each. After flotation costs, Husky received \$604.50 each. The bonds have a \$1,000 maturity value and pay \$50 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Husky’s marginal tax rate is 40%. 5. St. Joe Trucking has sold an issue of \$6 cumulative preferred stock to the public at a price of \$60 per share. After issuance costs, St. Joe netted \$57 per share. The company has a marginal tax rate of 40 percent. a. Calculate the aft er-tax cost of this preferred stock offering assuming that this stock is a perpetuity. If the stock is callable in five years at \$66 per share and investors expect it to be called at that time, what is the after-tax cost of this preferred stock offering? (Compute to the nearest whole percent.)

4. Husky Enterprises recently sold an issue of
10-year maturity bonds. The bonds were sold at a deep discount price of \$615 each. After flotation costs, Husky received \$604.50 each. The bonds have a \$1,000 maturity value and pay \$50 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Husky’s marginal tax rate is 40%.

5. St. Joe Trucking has sold an issue of \$6 cumulative preferred stock to the public at a price of \$60 per share. After issuance costs, St. Joe netted \$57 per share. The company has a marginal tax rate of 40 percent.
a. Calculate the aft er-tax cost of this preferred stock offering assuming that this stock is a perpetuity.
If the stock is callable in five years at \$66 per share and investors expect it to be called at that time, what is the after-tax cost of this preferred stock offering? (Compute to the nearest whole percent.)

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