#18-21

18) Use the dividend growth model to determine the required rate of return for equity. Yesterday your firm paid a dividend of $4.23 per share. Further, the recent stock price is $70.05 per share, and you anticipate a growth rate in dividends of 2.7% per year for the foreseeable future. A) 9.09% B) 8.71% C) 8.90% D) There is not enough information to answer this question. 19) Your firm has just issued a 30 -year $1,000.00 par value, 8.5% coupon semiannual bond for a net price of $662.00. What is the yield to maturity? Use a financial calculator to determine your answer. A) 13.00% B) 12.64% C) 12.00% D) 6.32% 20) Mitchell Drafting has debt with a market value of $330,000, preferred stock with a market value of $108,000, and common stock with a market value of $773,000. If debt has a cost of 5%, preferred stock a cost of 8%, common stock a cost of 15%, and the firm has a tax rate of 25%, what is the WACC? A) 9.33% B) 10.29% C) 11.31% D) 11.65% 21) The following information comes from the balance sheet of Lavik Enterprises. The value of common stock is $600,000, retained earnings equal $300,000, total common equity equals $900,000, preferred stock has a value of $60,000 and long-term debt totals $210,000. For purposes of estimating the firm's WACC, what are the weights of long-term debt, preferred stock, and equity? A) D/V=17.9%,PS/V=5.1%, and E/V=76.9% B) D/V=17.9%,PS/V=76.9%, and E/V=5.1% C) D/V=$210,000,PS/V=$60,000, and E/V=$900,000 D) There is not enough information to answer this