QUESTION 10

1. Company A just paid a dividend of $2.00. The stocks last closing price was $21.00. You expect the stock price to be in equilibrium. You expect growth at a constant rate of 5%. Your required rate of return is 9%.

   What is the expected price of the stock?

   $52.50

   $56.00

   $50.00

   $48.95

   Using the same information from question 10, what is the dividend yield for this stock?

   9%

   4.0%

   4.20%

   5%

   QUESTION 12

   If preferred stock with an annual dividend of $10 sells for $150, what is the preferred stocks expected return?

   7.8%

   6.67%

   15%

   5%

   QUESTION 13

   Which of the following is NOT included in a WACC calculation?

   Preferred stock

   Bonds

   Common equity

   Accounts payable

   QUESTION 14

   A firm has a target capital structure that includes 30% debt, 20% preferred stock, and 50% common equity. The current YTM for bonds is 9%, expected returns on preferred stock is 11%, and common equity returns are 15%. Their tax rate is 25%.

   Calculate WACC for this company.

   10.37%

   11.37%

   11%

   10%

   QUESTION 15

   Which of the following is NOT one way that management can alter their company's WACC?

   		Choosing capital budget projects that are less risky
   		Altering market interest rates
   		Altering their target capital structure
   		Altering their dividend strategy