fin101

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Q1) What is cost of equity capital of a firm if the market risk premium is 8%, the risk-free rate return is 5.4% and a beta of 1.2?

1. 14.5%
2. 12.5%
3. 13.5%
4. 15%

Q2) A share of preferred stock has a 9 percent dividend rate, $100 stated value and a price of $62. What is the cost of this preferred stock?

1. 15%
2. 8%
3. 7%
4. 14.5%

Q3) Assume a companys preferred stock is selling currently at $125, what is the dividend paid by the firm if the required rate of return is 11 percent?

1. $12.5
2. $13
3. $13.75%
4. 14.25%

Q4) What is the present value of the tax savings in perpetuity for a firm that plans to issue $5,000,000 worth of debt at a yield to maturity of 12% if the marginal corporate tax rate is 40% ?

1. $240,000
2. $600,000
3. $2,000,000
4. $5,000,000