Question
10. A 15-year, 10% semiannual bond sells for $1,153.72. Whats yield to maturity, or return required from the investors; OR, what is the cost the
10. A 15-year, 10% semiannual bond sells for $1,153.72. Whats yield to maturity, or return required from the investors; OR, what is the cost the firm pays to the bond holders? Face value is $1000. The firms tax rate is 40%. (Hint: Chapter 9. This is debt, so need to calculate AFTERTAX cost of debt). Calculate the yield first (I/YR)).
a. 8.20% b. 10% c. 5% d. 4.92%
11. CDK, Ind. just paid a dividend of $4 per share. It is anticipated that the company will maintain a 4.5 percent annual dividend growth rate. If a share of CDK, Inc. currently sells for $35.50 per share, what is required rate of return (Cost of equity)?
a. 17.89% b. 16.27% c. 15.67%
12. Angelo Company has a capital structure of 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new common stock. What is Avery's WACC?
a. 8.15% b. 8.48% c. 8.82%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started