Question
Problem 11-1 Cost of Equity (LG11-3) Diddy Corp. stock has a beta of 1.4, the current risk-free rate is 6 percent, and the expected return
- Problem 11-1 Cost of Equity (LG11-3)
Diddy Corp. stock has a beta of 1.4, the current risk-free rate is 6 percent, and the expected return on the market is 15.00 percent.
What is Diddy's cost of equity?(Round your answer to 2 decimal places.)
2.Problem 11-14 Weight of Preferred Stock (LG11-4)
OMG Inc. has 7 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 4,000 bonds. Suppose the common shares sell for $19 per share, the preferred shares sell for $18 per share, and the bonds sell for 108 percent of par.
What weight should you use for preferred stock in the computation of OMG's WACC?(Round your answer to 2 decimal places.)
3.Problem 11-5 Tax Rate (LG11-3)
Suppose that LilyMac Photography expects EBIT to be approximately $70,000 per year for the foreseeable future, and that it has 300 10-year, 4 percent annual coupon bonds outstanding. (UseTable 11.1.)
What would the appropriate tax rate be for use in the calculation of the debt component of LilyMac's WACC?
4.Problem 13-1 NPV with Normal Cash Flows (LG13-3)
Compute the NPV for Project M if the appropriate cost of capital is 7 percent.(Negative amount should be indicated by a minus sign.Do not round intermediate calculations and round your finalanswer to 2 decimal places.)
Project MTime:012345Cash flow:-$1,700$490$620$660$740$240
Should the project be accepted or rejected?
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