Question
*Please do not use excel to solve! 2) If a firm's WACC is 10.25%, their after-tax cost of debt is 5% and they have $100,000
*Please do not use excel to solve!
2) If a firm's WACC is 10.25%, their after-tax cost of debt is 5% and they have $100,000 in debt and $200,000 in equity, what is their cost of equity?
3) What is the WACC of a company with $100M in debt and $250M in equity if its cost of debt is 8% and its cost of equity is 12%. It's marginal tax rate is 35%.
4) Sally is interested in buying 6-year bonds that pay a 12% coupon on a semi-annual basis. The current market yield for similar bonds is 8%. What should be the current price of this bond?
5) Assume a company recently paid a dividend of $2 and dividends are expected to grow at a constant rate of 5% every year. If an investor's required rate of return is 10%, what should be the price of the stock six years from now? 6) Assume a company plans to pay the following dividends: $2 in year 1; $5 in year 2; $4 in year 3; $5 in year 4. After that, dividends are expected to grow at a constant rate of 6%. If an investor's required rate of return is 10%, what is the current market price of the company's stock? Answer choices: $12.51 , $102.87 , $45.81 , $132.50
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started