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THE UNIVERSITY OF HONG KONG

FACULTY OF BUSINESS AND ECONOMICS

FINA1003/1310A/B/C Corporate Finance

FIRST SEMESTER, 2014-2015

Tutorial 9 Suggested Solutions

Question 1

Question 2

The after-tax rate is more relevant because that is the actual cost to the company.

FINA1003/1310 Corporate Finance Tutorial Problem Set 9 Suggested Solutions

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Question 3

FINA1003/1310 Corporate Finance Tutorial Problem Set 9 Suggested Solutions

3

Question 4

(a)

(b)

FINA1003/1310 Corporate Finance Tutorial Problem Set 9 Suggested Solutions

4

Question 5

(a) He should look at the weighted average of the flotation cost, not just the debt cost.

(b)

(c)