8

a)

b)

When calculating the Weighted Average Cost of Capital, the portion attributable to determine cost of debt is a. Yield to Maturity X (1-tax rate) X % of debt used by the company b. Int Rate X (tax rate) X % of debt used by the company c. % of debt divided by % of (debt + equity) d. Dividends Per Share X (1 - tax rate) X % of debt A firm's stock is selling for $22.50. Just recently they paid a $3 dividend and dividends are expected to grow at 3% per year. What is the required return? a. 10.50% b. 21.15% c. 14.99% d. 16.73% Because the "Dow" only tracks 30 blue chip companies, the S&P 500 is a. Not as reliable since it only tracks small companies b. Standard and Poor's gauge of the bond market's strength c. a better barometer of the health of the economy since it tracks 500 large cap companies d. The same as the NASDAQ, with a different owner