24) Find if the following stock is constant growth model to over priced or under priced. UUse the CAPM model and the answer . Risk free rate is 2% Market return is 9%. Beta of the stock is or Currently the , stock is selling for rate of dividends is 10% Expected dividend at the cnd of the year $1.50 . for $20. a) stock is under priced b) it is over priced e) stock is correstly priced 25) Use above data : this stock will plott the Security market line a) above b) below e) on 26) Which two variables (X and Y variables) do you use, in estimating the Beta of s tock 70 70 80 01 82 83 simple regression analysis of two variables ; what are the two variables) b) Market return, Inflation rate D) Beta; Stock return a) Stock Return; Risk free rate c) Stock return; Market return 27) In choosing the right kind of securities to add to a portfolio, so as to diversify and reduce Correlation to the 14 your risk of the entire portfolio, the preferred securities are the ones with existing stocks in your portfolio a) Positive b) negative 28) The following type of risk factors represent risk for an investor: Inflation changes Interest rate changes; changes in Political structure: a) Systematic b) Unsystematic or Non systematic risk 29) Find the after tax cost of debt for the firm. Bond is sold to investors for $1000. Firm pays out $75 towards flotation costs. Coupon rate is 12%. Tax rate is 20%. It has 20 years to maturity. A)13.1% )6.5 % C)10.5 % D)8.75% 30) Find the cost of Preferred stock for the firm. Firm sells preferred stock with a face value of SSO and pays a flotation charge of$5 to the brokerage industry. Tax rate is 30%. Dividend paid out are $5 per share. B)1096 C)8.5 % D)13.6% A)11% 31) Find the cost of internal equity for the firm using appropriate model. Risk free rate is 5%. Tax rate is 40% Bonds ofsimilar companies currently are yielding 9%. Historically, the premium for investing in stocks over bonds has averaged 6%. cji1% D)7.5% A)996 B)15%