QUESTION 6

1. WannaGoOut Corp. common stock has a beta of 1.6. If the risk free rate of return is expected to be 3.15% and the market rate of return is 13.16%, what is the cost of equity for WannaGoOut's common stock? answers should be entered as percentages s0 10.04% should be entered as 10.04.

10 points

QUESTION 7

1. Which of the following are true regarding a stock's intrinsic value?

   		The price the stock buys and sells at
   		Based on perceived information as seen by investors
   		In equilibrium it is greater than the market price
   		Based on trading volume
   		It cannot be measured precisely

10 points

QUESTION 8

1. Recently, Flowers Food had a Beta of 0.19. What can you conclude form this information?

   		This stock has higher systematic risk that the average stock
   		This stock has less systematic risk than the average stock in the market
   		This stock yields a 19% required returns
   		The market value of the stock is 19% below the intrinsic value
   		19% of the firm's risk cannot be diversified away

10 points

QUESTION 9

1. A $1,000 par value 10-year bond with a 9% coupon rate with annual payments recently sold for $870. The yield to maturity

   		is greater than 9%
   		is 9%
   		is less that 9%
   		cannot be determined

10 points

QUESTION 10

1. Calculate the opportunity cost of capital (WACC) for a firm with the following capital structure: 57% in debt, 18% in preferred stock, and the remaining fraction in equity.The firms has a cost of debt of 7.71%, a cost of preferred stock equal to 10.63% and a 13.4% cost of common stock. The firm has a 29% tax rate. You answer should be entered as a %, for example 15.48%