Reference no: EM131416718
Assignment: Rate of Return for Stocks and Bonds
The purpose of this assignment is to allow the student an opportunity to calculate the rate of return of equity and debt instruments. It allows the student to understand the effects of dividends; capital gains; inflation rates; and how the nominal rate of return affects valuation and pricing. The assignment also allows the student to apply concepts related to CAPM, WACC, and Flotation Costs to understand the influence of debt and equity on the company's capital structure.
Assignment Steps
Resources: Corporate Finance
Calculate the following problems and provide an overall summary of how companies make financial decisions in no more than 700 words, based on your answers:
1. Stock Valuation: A stock has an initial price of $100 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $125. Compute the percentage total return, capital gains yield, and dividend yield.
2. Total Return: You bought a share of 4% preferred stock for $100 last year. The market price for your stock is now $120. What was your total return for last year?
3. CAPM: A stock has a beta of 1.20, the expected market rate of return is 12%, and a risk-free rate of 5 percent. What is the expected rate of return of the stock?
4. WACC: The Corporation has a targeted capital structure of 80% common stock and 20% debt. The cost of equity is 12% and the cost of debt is 7%. The tax rate is 30%. What is the company's weighted average cost of capital (WACC)?
5. Flotation Costs: Medina Corp. has a debt-equity ratio of .75. The company is considering a new plant that will cost $125 million to build. When the company issues new equity, it incurs a flotation cost of 10%. The flotation cost on new debt is 4%. What is the initial cost of the plant if the company raises all equity externally?
|
Research medication errors in children
: Using the UMA Virtual Library, research medication errors in children in the U.S. Discuss your findings and how often conversion errors are to blame. Be sure to cite your references in your responses.
|
|
Develop a plan to calculate potential financial implications
: Develop a plan to calculate potential financial implications for a nationwide company of your choice. Take a position on whether or not break-even sales curves are worth the time and effort they require a company to invest. Support your position wi..
|
|
Which of given would change if sample sizes are changed
: When taking large random samples from two different populations and finding the sampling distribution of p^1 - p^2 explain which of the given would change if the sample sizes are changed.
|
|
Using standardized interviews or employment tests
: Analyze two ethical and legal considerations in using standardized interviews or employment tests that assess aptitude, attitude, honesty, and personality during the selection process. Provide specific examples to support your rationale.
|
|
Compute the percentage total return and capital gains yield
: A stock has an initial price of $100 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $125. Compute the percentage total return, capital gains yield, and dividend yield.
|
|
Proportion of pregnancies lasts
: (a) What proportion of pregnancies lasts more than 283 days? (b) What proportion of pregnancies lasts between 238 and 278 days?
|
|
Draw a picture of the sampling distribution
: Define in words what the parameter p1 represents in this situation.- Draw a picture of the sampling distribution that you described in part (c), similar to given Figure.
|
|
Make it difficult to adopt a strategic approach
: Select an organization (a place that you currently work at or have knowledge with) and for this organization, please define how this organization incorporates a “partnership perspective for managing human resources.” Is it realistic to expect this or..
|
|
Review the companies balance sheets and statements of income
: Review the companies' balance sheets, statements of income/operations, and statements of cash flows. Identify and describe five similarities and five differences between the two companies' financial statements.
|