Question
Question 1 Other than dividend growth model, we can employ Market Multiple Analysis method for stock valuation. We suppose a firm's estimated earnings per share
Question 1
Other than dividend growth model, we can employ Market Multiple Analysis method for stock valuation. We suppose a firm's estimated earnings per share is $2.25. The average price to earnings (P/E) ratio for similarly publicly traded firms is 10. What's the firm's expected stock price?
$25
$20
$22.5
$50
Question 2To help finance a major expansion, a company sold a noncallable bond several years ago that now has 15 years to maturity.This bond has a 10.25% annual coupon, paid semiannually, it sells at a price of $1,025, and it has a par value of $1,000.If the company?s tax rate is 30%, what component cost of debt should be used in the WACC calculation?
5.96%
6.23%
6.98%
6.51%
Question 3You were hired as a consultant to a company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity.The before-tax cost of debt is 6.0%, the cost of preferred is 8.0%, and the cost of retained earnings is 13.0%.The corporate tax rate is 28%. The firm will not be issuing any new stock.What is its WACC?
8.72%
9.02%
9.88%
10.15%
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