- Cost of equity
Isabelle Thomas and Son, Inc. just paid the annual dividend on their
common stock in the amount of $1.20 per share. The company expects to maintain
a constant 3% rate of growth in their dividend payments. Currently, the stock
is selling for $20.40 a share. What is the cost of equity for Isabelle Thomas
and Son, Inc.?
- Cost of equity
The Curtis Plane Co. has paid $1.10, $.90, $.83 and $.75 in annual
dividends over the past four years, starting with the latest year first. This
year the company is paying a dividend of $1.22 a share. What is the average
growth rate of the dividends?
- Cost of equity
The stock of Neal & Co. has a beta of 1.40. The risk-free rate of
return is 3.5% and the risk premium is 8%. What is the expected rate of return
on Neal & Co. stock?
- Cost of debt
Four years ago, JE, Inc. issued twenty-year bonds that have a face value
of $1,000 per bond and pay interest semi-annually. These bonds currently sell
for $1,012.30 and have a 9% coupon. What is the pre-tax cost of debt?
- Cost of debt
The pre-tax cost of debt for Morrison and Sons is 8.78%. The tax rate is
35%. What is the after-tax cost of debt for Morrison and Sons?
- Portfolio weights
Wilson and Ruth, Inc. has 720,000 shares of common stock outstanding at a
market price of $32.10 per share. They also have 50,000 shares of preferred
stock outstanding at a price of $45 a share. The company has 20,000 bonds
outstanding that are currently selling at 98% of face value and mature in 9
years. The bonds carry a 6% coupon and pay interest annually. The bonds have a
face value of $1,000. The tax rate is 34%. What are the portfolio weights that
should be used in computing the weighted average cost of capital?
- Weighted average cost of capital
A firm has a debt-equity ratio of .45 and a tax rate of 34%. The cost of
equity is 9.4% and the pre-tax cost of debt is 8%. What is the weighted average
cost of capital?
- Weighted average cost of capital
Merilee, Inc. maintains a capital structure of 40% equity, 15% preferred
stock and 45% debt. The cost of equity is 12% and the cost of preferred is 9%.
The pre-tax cost of debt is 8%. The tax rate is 35%. What is the weighted
average cost of capital?
- Flotation costs
Your company maintains a debt/equity ratio of .60. The flotation cost for
new equity is 12% and for debt it is 6%. The firm is considering a new project
which will require $5 million in external funding. What is the initial cost of
the project including the flotation costs?
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