Ebeling Inc. has a perpetual preferred stock dividend of 1.15 per quarter and its current stock price is 48. What is its component cost of preferred stock?

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Question 2 (1 point)

Emphyrio Inc. wishes to issue new stock to finance an aggressive expansion. Lord investment bank charges a flotation cost of 0.10 as a fraction of each stock sold. Emphyrio's current stock price is 26, and it expects to pay a dividend of 0.36 at the end of the year. What is Emphyrio's component cost of a new equity issue?

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Question 3 (1 point)

The US government T-bill has a yield of 0.04, the Wilshire 5000 is expected to yield 0.08, and a stock's beta is 1.2. If inflation is expected to increase by 0.01 next year, but everything else remains the same, what will the new cost of retained earnings be?

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Question 4 (1 point)

A method of determining a company's cost of retained earning is the own bond plus risk premium approach. This approach assumes that the risk of a company is embedded in its bond yield and the required retained earning yield is the company's bond yield plus a risk premium. If a company has BBB rated bonds with a yield of 0.07 and the risk premium is 0.03, what is the company's cost of retained earnings?

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Question 5 (1 point)

Shoop Bank has an average WACC of 0.14 and adjusts for risk by adding or subtracting 0.01 to or from its average WACC. If Shoop considers a a business loan above average risk, a car loan average risk, and a new ATM machine below average risk, what is Shoop's risk adjusted WACC for a business loan?

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Question 6 (1 point)

Sarapo Inc's are trading at their par value of $1,000 and pay interest 4 times a year. If each interest payment is 6 what is Sarapo's component cost of debt?

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Question 7 (2 points)

A company's cost of debt is 0.06, and its cost of retained earnings is 0.10. If the company is financed only with debt and equity and it equity fraction is 0.9, what is the company's WACC?

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Question 8 (1 point)

A firm is raising funds by selling a package of equity, debt and preferred stock.

https://www.investopedia.com/terms/p/preferredstock.asp

The details of the package are:

1) Equity sold for $20 million. Expected perpetual dividends to buyers is $1.95 million per year.

2) Preferred stock sold for $5 million. Expected perpetual dividends to buyers is $0.4 million per year.

3) Debt sold, perpetual risk-less (guaranteed) coupon payments to be $4 million a year and is discounted at a rate of 4.05% per year.

Assume no taxes and other Modigliani-Miller assumptions also hold.

What is the WACC for the firm?

Please express your answer as a percentage. For example, if your answer is 7.32%, then enter 7.32 in the answer box.

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Question 9 (1 point)

A firm is raising funds by selling a package of equity, debt and preferred stock.

https://www.investopedia.com/terms/p/preferredstock.asp

The details of the package are:

1) Equity sold for $20 million. Expected perpetual dividends to buyers is $2 million per year.

2) Preferred stock sold for $10 million. Expected perpetual dividends to buyers 6.85% per year.

3) Debt sold for $31.50, perpetual risk-less (guaranteed) coupon payments to be $1.5 million a year.

Assume no taxes and other Modigliani-Miller assumptions also hold.

What is the WACC for the firm?

Please express your answer as a percentage. For example, if your answer is 7.32%, then enter 7.32 in the answer box.

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