(a) Paris Corporation issue Bond Mars which pays a coupon rate of 8% compounded semi- annually, with a maturity period of 10 years. The face value of the bond is $1,000 with an 10% yield to maturity. 2 years later, the bond's yield dropped to 7% due to a recession in the economy. You are required to calculate the value of Bond Mars before the recession and during recession. Furthermore, briefly describe the changes to the bond's value. (11 marks) (b) Karl Corporation is a public listed company. The entity intends to measure its cost of capital. The finance executive has collected the necessary data as follows: Preferred stock features: 500,000 preferred stocks at $8 per share with a flotation cost of 5% per share. The company declared a dividend of $0.60 per share. Common stock features: 900,000 common stocks with a market value of $6.50 per share with a flotation cost of 3% per share. Recently, the company has paid a dividend of $0.50 per share and expects its dividends to grow at 4% indefinitely. Debt features: A bank has lent out a $1,450,000 to the company. Besides, the company issues a $1,000 par value bond with an annual coupon interest rate of 5%. The bond matures in 9 years. The market price of the bond is $1,200 with a flotation cost of 5%. The company's tax rate is 21%. Calculate the weighted Average Cost of Capital. (14 marks)

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