Please answer attached 3 questions:

1. Jamestown Insurance Services has a target capital structure of 85 percent common stock, 10 percent preferred stock, and 5 percent debt. The cost of equity for Jamestown Insurance Services is 12.5 percent, the cost of preferred stock is 8 percent, the cost of debt is 6 percent, and the relevant tax rate is 30 percent. What is the WACC for Jamestown Insurance Services?

Answer:

1. Maytown Company has a target capital structure of 60 percent equity and 40 percent debt. Maytown Company currently has 6.5 percent coupon bonds (with annual coupon payments) outstanding with a par value of $1,000 and 20 years left until maturity that are currently selling for $990. In addition, Maytown Company’s equity beta is .9, the risk free rate is 1.5 percent, and the market risk premium is 4 percent. What is the WACC for Maytown Company if the appropriate tax rate is 20 percent?

Answer:

1. Hawthorn National Bank (HNB) has a target debt to equity ratio of 2.50 and currently does not have any preferred stock outstanding. The cost of debt for GNB is 9 percent and the appropriate tax rate is 35 percent. HNB’s common stock is currently trading for $52 per share and is expected to pay a dividend of $3 next year. In addition, the market expects dividends to grow at a rate of 3 percent indefinitely. What is the WACC for HNB?

Answer: