Reference no: EM132271962

Please need help with these questions, I need to understand the steps!

1. Show the capital accounts at the end of the first year of operation for a firm that, at the beginning of the year, issued 50,000 shares of $1.50 par value common stock for $15 per share, repurchased 5,000 shares during the year at $20 per share, and paid out 40 percent of earnings as dividends with a 50 cent per share dividend.

2. Calculate the beta of a firm's equity if the asset beta is 1.1, the debt beta is .05, and the firm has 30 percent debt in the capital structure.

3. A bank can purchase an ATM (automated teller machine) for $110,000 that has an estimated life of six years. Maintenance over that period will begin at $2,500 annually and increase at a 10 percent rate. If the ATM is purchased the bank will not be required to hire one additional (human) teller. Including fringe benefits, the teller costs $18,000 per year, and this amount is expected to increase 5 percent annually. If the bank's cost of capital is 10 percent, which alternative should be selected?

4. What is a firm's weighted-average cost of capital if the stock has a beta of 1.45, Treasury bills yield 5 percent, and the market portfolio offers an expected return of 14 percent? In addition to equity, the firm finances 35 percent of its assets with debt that has a yield to maturity of 9 percent. The firm is in the 35 percent marginal tax bracket.