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1. Preferred stock of Ford Motors pays a dividend of $5 each year and trades at a price of $30. What is the cost of preferred stock capital for Ford?
Round to four decimal places. Give answer in decimal form without commas or dollar signs.
2.IBM expects to pay a dividend of $4 next year and expects these dividends to grow at 7% a year. The price of IBM is $90 per share. Your estimate of the market risk premium is 6%. The risk-free rate of return is 5% and IBM has a beta of 1.2.What is IBM's cost of equity capital using the two methodologies, DGM and CAPM respectively?
3. A firm has a capital structure with $2 in equity and $7 of debt. The cost of equity capital is 0.13 and the pretax cost of debt is 0.02. If the marginal tax rate of the firm is 0.49 compute the weighted average cost of capital of the firm.
Suppose you have $50,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $20 per share. You notice that a put option with a $20 strike is available with a premium of $2.5. Calculate your percentage..
Miltmar Corporation will pay a year-end dividend of $5, and dividends thereafter are expected to grow at the constant rate of 7% per year. The risk-free rate is 4%, and the expected return on the market portfolio is 16%. The stock has a beta of 0.75...
Chris is considering buying a property that will generate a monthly net cash flow of $550 for the next 15 years.
According to the MM view of corporate taxes, what is the value of the levered firm in millions of dollars if the company’s tax rate is 25 percent?
Suppose you know that a company’s stock currently sells for $63 per share and the required return on the stock is 13 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it..
The 2015 income statement for Duffy’s Pest Control shows that depreciation expense was $191 million, EBIT was $492 million, and the tax rate was 35 percent. At the beginning of the year, the balance of gross fixed assets was $1,562 million and net op..
The project will require an additional invest- ment in working capital of $250,000 in year 0 and $150,000 at the end of year 1. What net cash flow will this project produce in year 10?
Consider these long-term investment data: Compute the annual rate on the real bond.
Annual interest rates consider the effect of interest earned on reinvested interest payments: When comparing loans, you should compare the effective annual rates: Annual and effective interest rates are equal when interest is compounded annually:
Mullin Interiors, a successful retailer of high-quality furniture, is located in affluent suburb where a large insurance company has just announced that it will lay off 4,000 employees. Because most of Mullin Interiors' sales are mad on credit, accou..
YIELD CURVES Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very..
What is the proportion of equity financing for a firm that expects a 15% return on equity, a 10% return on assets, and an 8% return on debt?
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