Explain different capital budgeting techniques

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1. Please calculate the Weighted Average Cost of Capital if the cost of debt is 10% with a 30% tax bracket. Also using the Gordon Growth Model, growth is 12%, the dividend next year is $1.25 and the price of the stock is $18.00 . The Capital Structure is 50% debt and 50% equity. Please propose a way to lessen the cost of debt.

2. Using the Capital Asset Pricing Model, assume the Risk Free Rate is 3%, the Market rate is 10% and the Beta is 1.7 Please explain how Beta measures risk for a firm.

3. Please explain the different capital budgeting techniques, please discuss the pros and cons.

4. Please calculate the value of a 30 year bond with a 10% coupon , that is due in 8 years, with current interest rates of 6%. Please explain why it would be a premium or discount bond.

5. Please explain the relationship between dividends and stock price growth as explained by the Gordon Growth Model

6. Please explain what is a callable bond . Why would a firm call a bond.

Reference no: EM131554669

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