Question
Shareholder value and the cost of capital 1.AJILimitedcurrentsharepriceis$20andithasjustpaida$1dividend.AsAJIisamaturefirm,this$1dividendisexpectedtogrowatarateof4%peryear.WhatisanestimateofthereturnshareholdersofAJILtdexpectedtoearn? 2. AJI also has preference shares outstanding that pays $2 per share fixed dividend. If this stock
Shareholder value and the cost of capital
- 1.AJILimitedcurrentsharepriceis$20andithasjustpaida$1dividend.AsAJIisamaturefirm,this$1dividendisexpectedtogrowatarateof4%peryear.WhatisanestimateofthereturnshareholdersofAJILtdexpectedtoearn?
2. AJI also has preference shares outstanding that pays $2 per share fixed dividend. If this stock is currently priced at $24, what is the return that preference shareholders expect to earn?
3.AJI has issued a 5 year bond with a coupon rate of 11% and par value of $1,000. The price received by AJI was $1,200. What is AJIs pre-tax cost of debt?
- 4.AJIhas5mordinarysharesoutstandingand1mpreferencesharesoutstanding.Itsliabilitieshaveabookvalueof$20m.IfAJIsordinaryandpreferencesharesarepricedasinpartsa)andb),whatisthemarketvalueoftheAJIsassets?
- 5.AJI faces a 30% tax rate. Given the information in parts a) d), and your answer to those problems, what is AJIs WACC?
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Intermediate Accounting IFRS
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
3rd edition
1119372933, 978-1119372936
