Question
The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this calculation.
The Merriam Company has determined that its return on equity is 15 percent. Management is interested in the various components that went into this calculation. You are given the following information: total debt/total assets = 0.35 and total assets turnover = 2.8. What is the profit margin?
| a. | 3.48% |
| b. | 5.42% |
| c. | 6.96% |
| d. | 2.45% |
| e. | 12.82% |
The common stock of Anthony Steel has a beta of 1.20. The risk-free rate is 5 percent and the market risk premium (rM - rRF) is 6 percent. What is the company's cost of common stock, rs?
| a. | 7.0% |
| b. | 7.2% |
| c. | 11.0% |
| d. | 12.2% |
| e. | 12.4% |
A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Given the following information, calculate the firm's weighted average cost of capital.
| rd | = 6% |
| Tax rate | = 40% |
| P0 | = $25 |
| Growth | = 0% |
| D0 | = $2.00 |
| a. | 6.0% |
| b. | 6.2% |
| c. | 7.0% |
| d. | 7.2% |
| e. | 8.0% |
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
8th edition
134730364, 978-0134730363
