VALUATION METHOD

Attached your solution and references.

1.What is the weighted average cost of capital for a firm with 40% debt, 20% preferred stock, and 40% common equity if the respective costs for these components are 8% after-tax, 13% after-tax, and 17% before-tax? The firm's tax rate is 35%.

10.22%

10.52%

11.48%

12.60%

2.The common stock of Anthony Steel has a beta of 1.20. The risk-free rate is 5 percent and the market risk premium is 6 percent. Assume the firm will be able to use retained earnings to fund the equity portion of its capital budget. What is the company's cost of retained earnings, ks?

7.0%

7.2%

11.0%

12.2%

3.Allison Engines Corporation has established a target capital structure of 40 percent debt and 60 percent common equity. The current market price of the firm's stock is P0 = $28; its last dividend was D0 = $2.20, and its expected dividend growth rate is 6 percent. What will Allison's marginal cost of retained earnings, ks, be?

7.9%

13.9%

14.3%

15.8%

4.The MNO Company believes that it can sell long-term bonds with a 6% coupon but at a price that gives a yield-to-maturity of 9%. If such bonds are part of next year's financing plans, which of the following should be used for bonds in their after-tax (40%) cost-of-capital calculation?

3.6%

4.2%

5.4%

6%

5.Bradshaw Steel has a capital structure with 30 percent debt (all long-term bonds) and 70 percent common equity. The yield to maturity on the company's long-term bonds is 8 percent, and the firm estimates that its overall composite WACC is 10 percent. The risk-free rate of interest is 5.5 percent, the market risk premium is 5 percent, and the company's tax rate is 40 percent. Bradshaw uses the CAPM to determine its cost of equity. What is the beta on Bradshaw's stock?

0.10

1.07

1.35

1.48

SUSTAINABILITY AND STRATEGIC AUDIT

1.SPPE Corp. is planning to expand and new projects is expecting to earn an average of P 750,000 annually. If the project requires for P 5,000,000 investment at 12% cost of capital. Compute for the Economic Value Added

2.An asset was purchased for P66,000. The asset is expected to last for 6 years and will have a salvage value of P16,000. The company expects the income before tax to be P7,200 and the tax rate applicable to the company is 30%. What is the average return on investment (accounting rate of return)?

3.A stock of XYZ company was purchased by the investor for $20. The current price of the stock comes out to be $25. Also, till date the investor has received a total dividend of $4. Compute for the TSR