Chapter 13

1-"Suppose Corporation A has a book (face) debt value of $10 Million USD, trading at 90% of its face value. It also has book equity of $15 Million USD, and 20 Million shares of common stock trading at $20 per share. What weights should Corporation A use for Debt capital when calculating its WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

2-"Suppose Corporation A has a book (face) debt value of $10 Million USD, trading at 90% of its face value. It also has book equity of $15 Million USD, and 20 Million shares of common stock trading at $20 per share. What weights should Corporation A use for Equity capital when calculating its WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

3-"Last year Firm D had a weighted interest rate of debt of 7%. If the corporate tax was 30% for that firm. What was the after tax interest rate on debt for firm D? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

4-"Firm XYZ issues a constant amount of preferred dividends at an annual value of $7. Its current preferred stock price is $25. What is the cost of preferred equity for Firm XYZ? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

5-"Continue considering Firm XYZ. Assume that the equity beta for Firm XYZ is 0.99. The Yield on 10-year treasuries is 2.5%, and that the market risk premium for the year is 8%. What would be the cost of equity for Firm XYZ? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05

6-"Continue considering Firm XYZ. If the dividends for Firm XYZ are the same for common and preferred stock, and the price for common stock is $30. What would be the cost of equity? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

7-"Continue considering Firm XYZ and your previous analysis. If you are to be conservative in your approach, what is the cost of Equity that you will use in estimating the WACC for Firm XYZ? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

8-"The expected return on a firm's equity is 10%, and the firm has a yield to maturity on its debt of 7%. Debt accounts for 33%, common equity for 60% and preferred equity for 7% of the firm's total market value. If its tax rate is 30%, and the cost of preferred equity is 20%, what is this firm s WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

9-"Firm UVW has a face debt value of $25 Million USDs trading at 90% with a pre-tax weighted cost of 6%. Firm UVW's common equity for the year was valued at $100 Million of USDs and preferred equity for $7 Million of USDs. The Preferred equity rate was calculated to be 18%. However, the common equity was to be calculated using CAPM approach, with a 2.5% risk free rate and a 10% market risk premium rate, assuming a Beta of 1.1. If the tax rate is 30%, what is Firm UVW s WACC? Express your answers in strictly numerical terms. For example, if the answer is 5%, write 0.05"

10-"Continue considering Firm UVW. Suppose Firm UVW is considering investing in a new project of urban development. The cost of the project is $10,000,000.00 of USD. Firm UVW expects that the non-incremental yearly cash flows from the project are $3,000,000.00 of USD for the next five years; e.g. that is $3,000,000.00 of USD each year. Using the calculated WACC in the previous question, what is the Net Present Value (NPV) of the project? Note: Express your answers in strictly numerical terms. For example, if the answer is five million dollars, write 5000000 as an answer."