Reference no: EM132844084

Questions -

Q1. Suppose your company has an equity beta of 1.5, and the current risk-free rate is 5.0%. If the expected market risk premium is 10.5%, what is your cost of equity capital?

Q2. Boilermaker Corp has a beta of0.8. The market return is expected to be 15%, and the current risk-free rate is 4%. We have used analysts' estimates to determine that the market believes our dividends will grow at 5% per year and our last dividend was $1. The stock is currently selling for $12.00. What is the company's cost of equity using the Security Market Line and using the Dividend Growth Model?

Q3. Buckeye Partners has a bond issue currently outstanding that has 15 years left to maturity. The coupon rate is 8%, and coupons are paid semiannually. The bond is currently selling for $1,100.21 per $1,000 bond. What is the cost of debt?

Q4. Wolverine Second Hand Stores has preferred stock that has an annual dividend of $5. If the current price is $25, what is the cost of preferred stock?

Q5. Spartan Machinery stock trades at $60 per share with a beta of 1.5, an estimated market return of 12%, and a risk free rate of 5%. There are 20 million shares outstanding. The company has bonds with a face value $1 billion outstanding and a market value of $980M. The coupon rate is 9% (semiannual coupons) and there are 10 years to maturity. The company has a tax rate of 38%. What is the WACC?