I need solutions to all of it. Completely lost. Topics included stock pricing and required rate of returns.

Finance 311 Fall 2017 Assignment 3 Multiple Choice questions are 2pts each. 1. The yield to maturity on a bond is . a) below the coupon rate when the bond sells at a discount, and equal to the coupon rate when the bond sells at a premium. b) the discount rate that will set the present value of the payments equal to the bond price. c) based on the assumption that any payments received are reinvested at the coupon rate. d) none of the above. e) a, b, and c. 2. Best Buy has preferred stock that pays a current dividend of $3.00 annually with a market price of $39.50. You expect the economy to grow at its current pace of 2.0% annually for the foreseeable future. What is the required rate of return on this preferred stock?, a) 10.82% b) 7.59% c) 9.88% d) 7.00% e) none of the above 3. Which of the following would be classified as debt lenders for a company? a) common shareholders, preferred shareholders, commercial banks b) preferred shareholders, banks, mortgage companies c) suppliers, common shareholders, mortgage companies d) commercial banks, mortgage companies, suppliers e) none of the above 4. The purpose of bond ratings is to, a) convey a message about the creditworthiness and default risk of a company. b) signal to the investment community about the financial stability and strength of a company. c) satisfy the Trust Indenture Act. d) all of the above e) a and b only 5. Which of the following is a reason to invest in bonds? a) portfolio diversification b) tax savings c) security d) a and b only e) a, b and c The following questions are worth 10 points each. Show your work. 6. Margo Corporation is a major producer of lawn care products. Its stock is currently trading at $8 per share; there are 10.5 million shares outstanding. Margo also has debt outstanding with a book value of $400million. The required rate of return on the bond is 10% and the bonds are currently priced in the market at 90% of their book value. Assume the risk-free rate is 8%, the market risk premium is 9%, Margo's beta is 2, and its tax rate is 35%. a) Calculate the cost of equity using the SML. 8 - 2(9-8) = 6% b) Calculate the weighted average cost of capital. 7. a) The annual dividend expected to be paid by Google on its common stock is $1.50. The required rate of return for the stock is 6%. If the stock is currently selling at $78 per share, what is the growth rate? 6 = 1.50/78 + g -> 6 = 1.9 + g -> g = 4.1% b) Exelon Corporation had earnings per share of $2.95 in 2015 and a dividend payout ratio of Corporation had earnings per share of $2.95 in 2015 and a dividend payout ratio of 35%. If dividends are expected to grow at 5% in 2016, beta is 0.75, Treasury Bill rate is 6% and market risk premium is 5.5%, how much should an investor pay for the stock? 6 - .75(5.5-6) -> 6.375% 2.95/.06+.06375 = 23.83 8. Longstreet Communications Inc. has the following capital structure: Debt 25%; Preferred Stock 15%; and Common Stock 60%. The company has a dividend payout ratio of 30%, and a tax rate of 40%. Last year Longstreet paid $3.60 dividends per share and dividends are expected to grow at 9% in the future. Their common stock currently sells at $60 per share; preferred stock sells at $100 per share with $11 dividend. a) calculate the after-tax cost of debt, cost of preferred and cost of common stock. b) what is the weighted average cost of capital for Longstreet? 9. Grace Industries issued a 20-year bond 3 years ago; the bond has a $1,000 face value and a 6% coupon rate. If the bond currently sells on the market for $744 and the company is in the 25% tax bracket, what is the after-tax cost of debt? (Hint: use linear interpolation) 10. If a bond with a $1000 face value and coupon rate of 10% currently sells in the market for $1114.96 and has 8 years left till maturity, what is the required rate of return? 1114.96 = (100 * x) + (1000 * x) 9.82% 11. La Quinta Hotels issued a new series of bonds on January 1, 2016. The bonds were issued with a $1000 face value, a 12% coupon and a maturity of 30 years. What will be the value of the bond 5 years later? And what will be the current yield of the bond 5 years later? Assuming the bond's value in 2039 will be $916.42, then what will be the yield to maturity (required rate of return) in that year? 12. JAB Holdings, owner of Panera Bread Restaurants, has a current stock price of $36. It's most recent dividend paid was $2.40 and it is expected to grow at a constant rate, g. If the required rate of return is 12%, what is the expected stock value 5 years from now? 13. What is the price of a bond with a $1000 par value, 10% coupon rate with maturity in 11 years if the required rate of return is 5%? (100 * 8.3064) + (1000 * .5847) = 1418.04 14. The Dakota Biotech Corp. wants to determine its after-tax cost of capital. The company's debtequity ratio is 0.92. The before-tax cost of debt is 6.75% with a 30% tax rate. The return on Treasury Bill currently is 8% and the cost of equity is 14.5%