1) McGill, Inc. will pay a quarterly dividend per share of $.0.62 at the end of each of the next 10 quarters. Thereafter, the dividend will grow at a quarterly rate of 1.8 percent, forever. The appropriate rate of return on the stock is 12.4 percent, compounded quarterly. What is the current stock price? (Hint: rate of return is quoted in nominal term, i.e., per year)

$45.34

$29.86

$33.51

$37.28

$41.04

2)Solar Tech is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 16% a year for the next five years and then decreasing the growth rate to 5.5% per year. The company just paid its annual dividend in the amount of $1.25 per share. What is the current value of one share if the required rate of return is 13.5%?

$25.06

$27.49

$23.64

$29.20

$21.51

3) Autodesk Corporation earned $9.4 million for the fiscal year ending yesterday. The company also paid out 30 percent of its earnings as dividends yesterday. The firm will continue to pay out 30 percent of its earnings as annual, end-of-year dividends. The remaining 70 percent of earnings is retained by the company for use in projects. The company has 1.6 million shares of common stock outstanding. The current stock price is $38.8. The historical return on equity (ROE) of 12 percent is expected to continue in the future. What is the required rate of return on the stock? (Hint: use the retention ratio and ROE to estimate the growth rate)

16.05%

15.28%

14.01%

13.32%

12.86%

4)Given the following information for Duston Company, find its WACC. Assume the company s tax rate is 25 percent. Debt: 30,000, 5.5 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 98 percent of par; the bonds make semiannual coupon payments. Common stock: 400,000 shares outstanding, selling for $47 per share; the beta is 1.65. Market: 7.0 percent market risk premium and 3.2 percent risk-free rate.

7.97%

8.35%

8.72%

9.00%

9.35%

5)Fletcher Construction has a cost of debt of 6.8%, a cost of equity of 12.5%, and a cost of preferred stock of 8.7%. The firm has 400,000 shares of common stock outstanding at a market price of $42.5 a share. There are 50,000 shares of preferred stock outstanding at a market price of $41 a share. The bond issue has a total face value of $2,500,000 and sells at 98% of face value. The tax rate is 25%. What is the weighted average cost of capital for the company?

12.71%

12.27%

11.93%

11.54%

11.29%

6)SoundTech Company wants to have a weighted average cost of capital of 7.4%. The firm has an after-tax cost of debt of 5.6% and a cost of equity of 12.4%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

2.50

2.34

2.10

2.78

1.92

7) Biscoff, Inc. has 450,000 shares of common stock outstanding at a market price of $28.6 a share. Last month, Biscoff paid an annual dividend in the amount of $1.72 per share. The dividend growth rate is 5%. Biscoff also has 30,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 5.5% coupon, pay interest annually, and mature in 10 years. The bonds are selling at 99% of face value. The company's tax rate is 25%. What is Biscoff's weighted average cost of capital?

6.37%

7.15%

5.96%

7.49%

6.82%