II. Computation (With solution)

1. If the risk-free rate is 3% and the market risk premium is 6%, what is the required rate of return on a stock with a beta of 1.5?

2. If the risk-free rate is 4% and the market risk premium is 8%, what is the required return for the overall stock market?

3. If a stock has a 16% expected rate of return, a 12% required rate of return on the market, and a 4% risk-free rate of return, what is its beta coefficient?

4. If a firm's tax rate is 35% and its interest rate on debt is 10%, what is it's after-tax cost of debt?

5. A firm's preferred stock currently trades at P100 per share and pays a P10 annual dividend per share. Ignoring flotation costs, what is the firm's cost of preferred stock?

6. A firm plans to retain 63 million of earnings for the year. Using a target capital structure of 53% debt, 2% preferred, and 45% equity, what's its retained earnings breakpoint?

7. What is this project's NPV if it costs P52,125; its expected cash inflows are P12,000 each year for 8 years, and its WACC is 12%?

8. Referring to the given in #8, instead of net present value, compute its internal rate of return.

9. Referring to the given in #8, instead of NPV, compute its payback period.

10. Referring to the given in #7, instead of NPV, compute its discounted payback period.