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1. You work for a firm with an issue of 40,000 bonds outstanding and 5,000,000 of market value in preferred stock that sells to yield 6%. What is the value of the preferred stock if it pays a $5 dividend?
2. The common stock has a market value of $50 per share with 100,000,000 shares outstanding. If the growth rate is 6% per annum and the earnings are $ 4 per share. What is the required rate of return of the common stock?
3. Assume the capital structure as in the above. What is the weighted average cost of capital if the maturity of the bond was 5 years and the coupon rate was 6%.
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