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What is the company cost of preferred stock

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Reference no: EM132921169

Question - Historical Returns: Expected and Required Rates of Return - You have observed the following returns over time:

Year

Stock X

Stock Y

Market

2012

16%

12%

13%

2013

18

7

11

2014

-17

-7

-12

2015

5

3

2

2016

24

9

13

Assume that the risk-free rate is 5% and the market risk premium is 7%. Do not round intermediate calculations.

1-What is the beta of Stock X? Round your answer to two decimal places.

2-What is the beta of Stock Y? Round your answer to two decimal places.

3-What is the required rate of return on Stock X? Round your answer to one decimal place.

4-What is the required rate of return on Stock Y? Round your answer to one decimal place.

5-What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to one decimal place.

6-Five years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,300 face value and a 5% coupon, semiannual payment ($32.5 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? Round your answer to 2 decimal places. Do not round intermediate calculations.

7-Barton Industries can issue perpetual preferred stock at a price of $51 per share. The stock would pay a constant annual dividend of $3.30 per share. If the firm's marginal tax rate is 40%, what is the company's cost of preferred stock? Round your answer to 2 decimal places.

Reference no: EM132921169

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