Question
1) Given thatpreference shares have an expected dividend stream of 20 cents in perpetuity and that the current market price (cum-dividend) of thepreference shares is
1)Given thatpreference shares have an expected dividend stream of 20 cents in perpetuity and that the current market price (cum-dividend) of thepreference shares is $2.40, calculate the cost ofcapital(kp)of these preference shares.
2)What is the cost of capital for bank overdraft (kbo). The overdraft rate is5.1 % pa compounded 12 times a year?
3)Calculate the cost of preference capital (kp) for a non-redeemable preference share which has the following:
Price = $15 and a Preference dividend of $1.9paid every six months (answer to 4 decimal places)
4)Calculate the cost of equity capital using CAPM if the risk-free rate of interest is 4 per cent, the return on the market portfolio is 10 per cent, the beta of the firm's assets is .8 and the and beta of equityis 1.2.
5) Assume that A limited paid a dividend of29.2 cents per share just recently. The shares currently sell for $10.1. You also estimate that the dividend will grow steadily at 2.7 % per year into the indefinite future. What is the cost of capital, kefor A limited?(Answer to 2 decimal places)
6) XYZ Corporation has just paid a dividend of55 cents per share.The current market price of the share is $15 and shareholders require a return of 11 % pa.What is the annual growth rate (g) of the dividends?(answer to 2 decimal places)
7) A company has annual net operatingcash flow(X) of 1 million dollarsin perpetuity and the market value of its capital (V) is10.4 million dollars. What is the company's cost of capital ko?
8)The next dividend for ABC Limited will be $0.6 per share (D1). Investors require a 13 % return on companies such as ABC Limited. ABC's dividend increases by 3 % every year. Based on the dividend growth model what is the value of ABC Limited shares today?
9)Polycorp has a debt equity ratio of 0.83.What is the correct debt ratio D/V that should be used in the WACC formula?
10) The 90 day bank bill rate is quoted as 5.4 in the financial press. What is the correct cost of capital kbbto be used in the WACC calculation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started