Cost of Equity: Dividend Growth

Summerdahl Resort's common stock is currently trading at $29 a share. The stock is expected to pay a dividend of $1.25 a share at the end of the year (D₁ = $1.25), and the dividend is expected to grow at a constant rate of 8% a year. What is the cost of common equity? Round your answer to two decimal places.

Cost of Preferred Stock

Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $80 a share with an annual dividend of $4.80 a share. Ignoring flotation costs, what is the company's cost of preferred stock, r_ps? Round your answer to the nearest whole number.

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Cost of Equity: CAPM

Booher Book Stores has a beta of 0.7. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 8%. The market risk premium is 7.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

Bond Yield and After-Tax Cost of Debt

A company's 5% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $526.77. The company's federal-plus-state tax rate is 25%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to one decimal place.

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Constant Dividend Growth Valuation

Boehm Incorporated is expected to pay a $3.10 per share dividend at the end of this year (i.e., D₁ = $3.10). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, r_s, is 17%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.

Constant Dividend Growth Valuation

Woidtke Manufacturing's stock currently sells for $38 a share. The stock just paid a dividend of $1.40 a share (i.e., D₀ = $1.40), and the dividend is expected to grow forever at a constant rate of 3% a year. What stock price is expected 1 year from now? Do not round intermediate calculations. Round your answer to the nearest cent.

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What is the estimated required rate of return on Woidtke's stock (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round the answer to two decimal places.

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Nonconstant Dividend Growth Valuation

A company currently pays a dividend of $3.6 per share (D₀ = $3.6). It is estimated that the company's dividend will grow at a rate of 20% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.4, the risk-free rate is 10%, and the market risk premium is 7%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

WACC

Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 25%, r_d = 7%, r_ps = 8.7%, and r_s = 13%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC? Round your answer to two decimal places.