QUESTION 18 ABC company’s market value of common stock
QUESTION 18
ABC company’s market value of common stock is $200 million, preferred stock is $300 million, and debt is $500 million. Suppose that the cost of equity is 7%, the before-tax cost of debt is 5.9%, cost of preferred stock is 5.1%, and the tax rate is 31%. Compute the WACC. Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer.
QUESTION 19
You take a loan of $44,057 to buy a car. As per the terms of the loan, you need to make monthly payments for 3 years at a 3.1% rate of interest. What is the amount of each monthly payment? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.
QUESTION 20
Suppose that today's stock price is $31. If the required rate on equity is 16.6% and the growth rate is 4.2%, compute the expected dividend (i.e. compute D1) Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
QUESTION 21
How many years will it take for your money to grow from $315 to $769 at 14% compounded semi-annually? Enter your answer rounded off to two decimal points.
QUESTION 22
The ABC Company has a cost of equity of 9.2 percent, a pre-tax cost of debt of 6.7 percent, and a tax rate of 26 percent. What is the firm’s weighted average cost of capital if the weight of debt is 78 percent? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 23
The ABC Co. has $1,000 face value stock outstanding with a market price of $1,094.7. The stock pays interest annually, matures in 8 years, and has a yield to maturity of 9.7 percent. What is the annual coupon amount? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 24
If you receive $1,391 at the end of each year for the first three years and $7,523 at the end of each year for the next three years. What is the net present value of this cash flow stream? Assume interest rate is 4.3%. Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
QUESTION 25
The risk-free rate is 6.4%, the market risk premium is 7.5%, and the stock’s beta is 1.52. What is the cost of common stock (Ke)? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 26
You want to create a portfolio as risky as the market. Suppose you invest your money in Stocks A, B, C, and the risk-free asset. Compute your investment in Stock C (i.e. solve for weight of Stock C)? Stock Weights Beta A 16 1.2 B 11 0.6 C ? 1.8 Rf ? ? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 27
You have observed the following returns on ABC's stocks over the last five years: 22.9%, 14.7%, -4.9%, 13.8%, 8.3% What is the arithmetic average returns on the stock over this five-year period. Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 28
You have a portfolio of two risky stocks which turns out to have no diversification benefit. The reason you have no diversification is the returns:
are completely unrelated to one another. | ||
move perfectly opposite of one another. | ||
move perfectly with one another. | ||
are too large to offset. | ||
are too small. |
-
Rating:
5/
Solution: QUESTION 18 ABC company’s market value of common stock