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What is the expected return on the share

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Reference no: EM132962051

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A share is expected to pay an annual dividend of $2.53 next year, and this dividend is then expected to grow at a constant rate of 3.8% p.a. in perpetuity. If the required rate of return is 10.6% p.a., what is the value of the share?

You are trying to determine your firm's cost of debt capital. The only debt on the balance sheet is a series of bonds that the firm has issued. The bonds are not frequently traded, and therefore it is not possible to determine the market price.

The following table shows various debt ratings, along with an analyst's estimate of the credit spread for the ratings shown. Standard and Poor's have given your firm a AA(120) debt rating. The risk-free rate of return is 2.9% and the corporate tax rate is 30%. What is your firm's before-tax cost of debt capital?

A preference share pays a constant dividend of $1.64 and is currently priced at $17.98. The corporate tax rate is 30%. What is the before-tax cost of preference shares?

A share has a beta of 1.2. The risk-free rate of return is 4.0% and the risk premium is 10.3%. What is the expected return on the share?

A firm has three components in its capital structure: debt, preference shares and ordinary shares. The following table shows the before-tax cost of each component, along with its market value.?

Capital Component Cost of Capital Market Value

Debt 4.0% $114 million preference

Shares 7.2% $160 million

Ordinary Shares1 2.8% $488 million

The corporate tax rate is 30%. What is the firm's Weighted Average Cost of Capital?

Reference no: EM132962051

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