Question 1 (1 point) Your firms has outstanding bonds with a 0.12 coupon and 0.06 yield to maturity. Your CFO believes that you can issue new bonds that would provide a similar yield to maturity If your marginal tax rate is 0.30, what is your firm's After-tax Cost of Debt? (Enter your answer as a decimal and carry out to 4 decimal places. Do not use the percent sign, i.e. 0.9999) Question 2 (1 point) Bob's Stuff, Inc has preferred stock with a stated dividend of $2.96, which currently trading at $28.90 per share, and Bob believes that the company can issue additional shares at that price net. What is Bob's cost of preferred stock? (Answer in decimal form to 4 places. Do not use a percent sign, i.e 0.9999). Question 3 (1 point) Steve's Specialties, Inc. paid its dividend yesterday, which as $ 2.50. The dividend has been growing at a rate of 0.045 and is expected to continue indefinitely at that rate. Steve's common stock is currently trading at 24.00 per share. The firms beta is 0.75. Treasuries (T-bills) are currently yielding 0.015, Average return on the market is 0.11. Using the DCF approach, what is Steve's cost of retained earnings? (Answer in decimal form to 4 places. Do not use a percent sign, i.e 0.9999). Question 4 (1 point) Steve's Specialties, Inc. paid its dividend yesterday, which as $ 1.75. The dividend has been growing at a rate of 0.025 and is expected to continue indefinitely at that rate. Steve's common stock is currently trading at 21.00 per share. The firms beta is 1.05. Treasuries (T-bills) are currently yielding 0.030, Average return on the market is 0.08. Using the CAPM, what is Steve's cost of retained earnings? (Answer in decimal form to 4 places. Do not use a percent sign, i.e 0.9999). Question 5 (1 point) Bob's Stuff, Inc has preferred stock with a stated dividend of $1.92, which currently trading at $27.40 per share, and Bob believes that the company can issue additional shares at that price, but with flotation costs at 7% of the selling price. What is Bob's cost of preferred stock? (Answer in decimal form to 4 places. Do not use a percent sign, i.e 0.9999). Question 6 (1 point) Steve's Specialties, Inc. paid its dividend yesterday, which as $ 2.75. The dividend has been growing at a rate of 0.035 and is expected to continue indefinitely at that rate. Steve's common stock is currently trading at 23.00 per share. The firms beta is 0.90. Treasuries (T-bills) are currently yielding 0.030, Average return on the market is 0.09. If the firm issues new common stock, it can be sold at the current market price and the flotation costs are expected to be 0.10 times the market price per share. Using the DCF approach, what is Steve's cost of new common equity? (Answer in decimal form to 4 places. Do not use a percent sign, i.e 0.9999). Question 7 (1 point) Jonkin & Co.'s before tax cost of debt is 9%, its marginal tax rate is 36%, and its cost of equity is 16%. The company's stock sells at book value and it has just published its most recent balance sheet below. Calculate Jonkin's Weighted Average Cost of Capital (WACC). Assets Liabilities & Equity Cash $120 Accounts Recevable 240 L/T Debt $1,152 Net Fixed Assets 2160 Common Equity 1.728 Total Assets $2,880 Total Liab & Equity $2,880 (Enter your answer as a percentage to the nearest basis point (i.e. 20.5% would be entered as 20.50). Do not use the percent symbol.) Question 8 (1 point) Harris & Handel's common stock currently trades at $34.00 a share. It is expected to pay an annual dividend of 2.90 a share at the end of the year, and the constant growth rate is 2.5% a year. What is the company's cost of common equity if all of its equity comes from retained earnings? (Enter your answer as a percentage to the nearest basis point (i.e. 20.5% would be entered as 20.50). Do not use the percent symbol.) Question 9 (1 point) Harris & Handel's common stock currently trades at $33.00 a share. It is expected to pay an annual dividend of $2.00 a share at the end of the year, and the constant growth rate is 6% a year. If the company issued new stock, it would incur an 8% flotation cost. What is the cost of equity on the new issue? 10.59% 11.59% 12.59% 13.59% Question 10 (1 point) The future earnings, dividends, and common stock price of Core-Tech Inc. are expected to grow 6% per year. Core-Tech's common stock currently sells for $21 per share; its last dividend was $2.00; and it will pay a $2.30 dividend at the end of the current year. If the firm's beta is 1.9, the risk-free rate is 8%, and the average return on the market is 14%, what is the firm's cost of common equity (retained earnings) using the CAPM approach? 17.2% 19.4% 21.4% 22.2%
