Reference no: EM132828350
1. Stock in Daenerys Industries has a beta of 0.9. The market risk premium is 9 percent, and T-bills are currently yielding 5 percent. The company's most recent dividend was $2 per share, and dividends are expected to grow at a 5 percent annual rate indefinitely.
If the stock sells for $32 per share, what is your best estimate of the company's cost of equity?
2. Holdup Bank has an issue of preferred stock with a $5 stated dividend that just sold for $94 per share.
What is the bank's cost of preferred stock?
3. Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 27 years to maturity that is quoted at 92 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.
What is the company's pretax cost of debt?
If the tax rate is 25 percent, what is the aftertax cost of debt?
4. Lannister Manufacturing has a target debt-equity ratio of 0.58. Its cost of equity is 17 percent, and its cost of debt is 9 percent.
If the tax rate is 32 percent, what is the company's WACC?
5. Fama's Llamas has a weighted average cost of capital of 12 percent. The company's cost of equity is 16.5 percent, and its pretax cost of debt is 9 percent.
The tax rate is 34 percent. What is the company's target debt-equity ratio?
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