What is the cost of equity for a firm with an asset beta of 1.2 and debt-equity ratio of 0.50, if the risk-free rate of return is 3 percent and the expected market return is 12 percent?

a.24.6 percent

b.13.8 percent

c.19.2 percent

d.21.0 percent

Jack owns 100 shares in ABC Ltd. The firm announces that it will pay $1 dividend per share one year from today and $2 dividend per share two years from today. After that, the firm will stop paying dividend. Jack does not want any dividend this year but wants as much dividend income as possible next year. If Jack can earn 10 percent return on his investments, what will be Jack's homemade dividend in two years, ignoring all taxes.

a.$3

b.$1.10

c.$2

d.3.10

Assume it requires 3 rights to obtain a new share in a rights offering. If the stock's price prior to the ex-rights date is $25 and the ex-rights price is $22.75, what is the value of each right?

a.$2.25

b.$0.75

c.$1.80

d.$0.60

Jack Ltd has 100,000 shares outstanding with a market value of $10 per share. What will be the market value per share if the firm does a 3-for-2 stock split?

a.$15

b.$20

c.$6.67

d.$10

Jack Ltd has a levered cost of equity of 13.84 percent and an unlevered cost of capital of 12.5 percent. The company has $5,000 in debt that is selling at par. The levered value of the firm is $14,600 and the tax rate is 30 percent. What is the pretax cost of debt?

a.8.60 percent

b.8.82 percent

c.3.68 percent

d.9.93 percent

From a tax-paying investor's point of view, a stock repurchase

a.Has the same tax effects as a cash dividend

b.Creates a tax liability even if the investor does not sell any of the shares they own

c.Is more desirable than a cash dividend

d.Is equivalent to a cash dividend