Reference no: EM133061042
Problem: Preferred Stock Market price
A firm has a preferred stock with SAR 100 par value that pays a dividend of 12%. What is the market price for the stock if the required rate of return is 7%?
Problem: Common Stock Market Price
A firm paid a dividend payment of SAR 650 last year and is expected to grow indefinitely at a rate of 7%. If you can achieve a 10% return on equity, what is the value of the stock?
Problem: Preferred Stock Value
A corporation preferred stock is selling for SAR 1750 per share and pays an annual dividend of SAR 152 per share. If the investor requires a return of 7%, what is the appropriate market value for the shares?
Problem: Growth Rate
If a firm's return on equity is 20% and management plans to retain 75% of earnings for investment purposes, what will be the firm's growth rate?
Problem: Dividend Constant Model-Stock Expected Rate of Return
A corporation paid a dividend of SAR 625 last year and the shares are selling for SAR 6250 per share. The dividend is expected to grow at 7% indefinitely. What is the stock's expected rate of return?
Problem: Required Rate of Return (CAPM)
A corporation's stock has a beta of 1.2. The risk-free rate is 8.5% and the expected return on the market is 11.5%. What is the required rate of return on the stock using the Capital Asset Pricing Model (CAPM)?
Problem: Cost of Debt
A firm's bond with a SAR 1000 par value currently selling at SAR825. The coupon rate is 10% with 12.5 years to the maturity date and the corporate tax is 25%. What is the cost of debt after tax?
Problem 11-8: WACC Calculation
A corporation's balance sheet shows SAR 400 million in debt, SAR 50 million in preferred stock, and SAR 550 million in total common equity.
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DATA
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The firm's tax rate is:
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15.00%
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Rate on Debt (Rd) Before Tax
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7.00%
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Rate on Preferred Stock (Rps)
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6.00%
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Rate on Common Stock (Rcs)
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11.00%
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What is its Weighted Average Cost of Capital (WACC)?
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Weight-Common Stock
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550
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Weight-debt
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400
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Weight-Preferred Stock
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50
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