What is the cost of preferred equity for firm

Assignment Help Financial Management

Reference no: EM131580823

1. JJ firm issues a constant amount of preferred dividends at an annual value of $3. Its current preferred stock price is $30. What is the cost of preferred equity for JJ Firm? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05

2. Assume that the equity beta for JJ is 1.1. The Yield on 10-year treasuries is 2%, and that the market risk premium for the year is 10%. What would be the cost of equity for JJ? Express your answers in strictly numerical terms

3. If the dividends for JJ firm are the same for common and preferred stock, and the price for common stock is $11. What would be the cost of equity for JJ firm? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05

4. Using the results of Problems 5 and 6. If you are to be conservative in your approach, What is the cost of Equity that you will use in estimating the WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05

5. The expected return on CA s equity is 2%, and the firm has a yield to maturity on its debt of 4%. Debt accounts for 19%, common equity for 75% and preferred equity for 6% of CA s total market value. If its tax rate is 40%, and the cost of preferred equity is 40%, What is this firm s WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05

6. ABI Construction has a face debt value of $20 Million USDs trading at 90% with a pre-tax weighted cost of 7%. ABI common equity for the year was valued at $50 Million of USDs and preferred equity for $3 Million of USDs. The Preferred equity rate was calculated to be 20%. However, the common equity was to be calculated using CAPM approach, with a 3% risk free rate and a 8% market risk premium rate, assuming a 1 Beta. If the tax rate is 35%, What is this firm s WACC

7. Suppose ABI Construction is considering investing in a new project of urban development. The cost of the project is $10 Millions of USD. ABI expects that the non-incremental yearly cash flows from the project are $3 Million of USD for the next five years; e.g. that is $3 Million of USD each year. Using the calculated WACC in the previous question, what is the Net Present Value (NPV) of the project?

Reference no: EM131580823

Questions Cloud

Interscholastic and recreational sport programs : What are the differences in athletic administration between interscholastic and recreational sport programs?

Calculations and understanding of semiannual coupon bonds : Complete the following statement based on your calculations and understanding of semiannual coupon bonds:

Present value of the tax benefits from depreciation : Estimate the present value of the tax benefits from depreciation.

Complete a set of cash flow t-accounts : Investments costing $38,000 were purchased for cash. Complete a set of cash flow T-accounts using the indirect method of computing cash flows from operations

What is the cost of preferred equity for firm : JJ firm issues a constant amount of preferred dividends at an annual value of $3. What is the cost of preferred equity for JJ Firm?

Microsoft word document concerning the following situation : Read the case study attached and report in a Microsoft Word document concerning the following situation:

Realized return is known as the holding period yield : If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

Biases that have interfered with your career : Do you feel that you have been treated differently in your work place because you are a woman?

Analyze the ethical considerations that apply : Analyze the ethical considerations that apply. Describe the organization's current hiring needs and projected hiring needs for the coming year.

User Account

All Pages