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BONDS:
a) Current yield =
Annual interest income
Current market price of bond
b) YTM = CP / m +
nxm
MP PV
2
MP PV
c) K
b
= C/m + (PV (MP- FC)
n x m
PV + (MP-FC)
2
K
b
(after tax) = k
b
(1 - tax rate)
PREFERRED SHARES
K
ps
= D/P
o
COMMON SHARES:
K
cs
= D
1
+ g
MP FC
P
0
= D
1
(k-g)
WACC = (% of total capital structure supplied by each type of capital) x (cost of
capital for each source of capital)