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Q8 XYZ corp has a beta of 1.25. T-bond rate is 3% and market risk premium as measured by S&P 500 Index is 6%. Your
Q8
XYZ corp has a beta of 1.25. T-bond rate is 3% and market risk premium as measured by S&P 500 Index is 6%. Your required rate of return is 10%. What is the rate of return on this stock using CAPM? A. 10% B. 10.5% C. 12% D. 14% The corporate tax rate is 30% The bond is a 10-year, 8% coupon rate, $1,000 par value, selling at $1, 150 today. The current price of ABC stock is $55 per share, current dividends are $2.62 and arc expected increase to $2.80 per share next year. Costs associated with new issue of common stock are estimated at 5% or $2.75 per share and stock can be priced at its current price of $55.00. ABC corporation has the following capital structure: What is after-tax cost of debt for ABC A. 4.20% B. 6.00% C. 8.00% D. 10% What is cost of Retained Earnings for ABC corp? A. 5.00% B. 7.00% C. 10.00% D. 12.1% What is the cost of new common stock of ABC? A. 5.00% B. 8.00% C. 12.36% D. 15.40% What is the Weighted Average Cost of Capital of ABC Corp? A. 4.20% B. 9.62% C. 12.10% D. 12.36%Step by Step Solution
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