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Question;3.Last week, Lester's Electronics paid an annual dividend of;\$2.10 on its common stock. The company has a longstanding policy of increasing;its dividend by 3 percent annually. This policy is expected to continue. What;is the firm's cost of equity if the stock is currently selling for \$44.60 a;share?;a.7.66 percent;b.7.71 percent;c.7.79 percent;D. 7.85 percent e. 7.90 percent;4.Deltronics just paid its first annual dividend of \$.20 a;share. The firm plans to increase the dividend by 4 percent per year;indefinitely. What is the firm's cost of equity if the current stock price is;\$11 a share? a. 5.82 percent;B. 5.89 percent;c.6.33 percent;d.6.48 percent;e.6.54 percent 5.The common stock of;Pittsburgh Steel Products has a beta of 1.42 and a standard deviation of 21.6;percent. The market rate of return is 12.5 percent and the risk-free rate is 5;percent. What is the cost of equity for Pittsburgh Steel Products?;a. 15.65 percent;b.17.75 percent;c.18.45 percent;d.20.50 percent;e.22.75 percent;6.Ziegler's Supply;has a beta of 1.06, a variance of.0124, a dividend growth rate of 2.8 percent;a stock price of \$27 a share, and an expected annual dividend of \$1.10 per;share next year. The market rate of return is 10.8 percent and the risk-free;rate is 4.1 percent. What is the cost of equity for Ziegler's Supply?;a.6.89 percent;b.7.87 percent;c.8.48percent;d. 9.04 percent;e.11.19 percent;7. Juno has 8 percent;bonds outstanding that mature in 19 years. The bonds pay interest semiannually;and have a face value of \$1,000. Currently, the bonds are selling for \$989;each. What is Juno'spre-tax cost of debt?;a. 8.09 percent;B. 8.11 percent;c.8.14 percent;d.8.18 percent;e.8.23 percent;8.Cobblestone Tours;has 10,000 bonds that are currently quoted at 103.6. The bonds mature in 9;years and carry a 10 percent annual coupon. What is Cobblestone Tour's aftertax;cost of debt if the applicable tax rate is 34 percent?;A. 6.20 percent;b.6.27 percent;c.7.17 percent;d.9.28 percent;e.9.39 percent;9. The preferred;stock of Nadine Fashions pays an annual dividend of \$7.25 a share and sells for;\$54 a share. The tax rate is 35 percent. What is the firm's cost of preferred;stock?;a.8.73 percent;b.9.46 percent;c.12.78percent;D. 13.43 percent;e.14.47 percent;10.Wilson's has a;cost of equity of 12.4 percent. The market risk premium is 8.4 percent and the;risk- free rate is 3.7 percent. The company is acquiring a competitor, which;will increase the company's beta to 1.4. What effect, if any, will the;acquisition have on Wilson's cost of equity capital?;a.no effect;b.decrease of 10.92;percent;c.decrease of 1.48;percent;D. increase of 3.06;percent;e. increase of 5.29 percent;11.The 6 percent;preferred stock of Mercer Livestock is selling for \$62 a share. What is the;firm's cost of preferred stock if the tax rate is 34 percent and the par value;per share is \$100?;a.5.88 percent;b.6.39 percent;3 | P a g e;c.7.04 percent;d.8.27percentE. 9.68;percent;12.The Burger Stop;has 80,000 shares of common stock outstanding at a price of \$28 a share. It;also has 15,000 shares of preferred stock outstanding at a price of \$63 a;share. There are five hundred 8.5 percent bonds outstanding that are priced at;par. The bonds mature in 14 years, pay interest semiannually, and have a face;value of \$1,000. What is the capital structure weight of the preferred stock?;a. 18.87 percent;b. 21.21 percent;C. 25.64 percent;d. 26.29 percent;e. 32.18 percent;13.J&J Movers has;40,000 shares of common stock outstanding at a price of \$34 a share. It also;has 4,000 shares of preferred stock outstanding at a price of \$58 a share. The;firm has 9 percent, 10- year bonds outstanding with a total face value of;\$500,000. The bonds are currently quoted at 96 and pay interest semiannually.;What is the capital structure weight of the firm's debt if the tax rate is 34;percent?;A. 23.17 percent;b.25.68 percent;c.25.94 percent;d.27.18 percent;e.28.46 percent;14.The component;costs of capital are market-determined variables in the sense that they are;based on investors' required returns.;a.True;b.False;15.For capital;budgeting and cost of capital purposes, the firm should assume that each dollar;of capital is obtained in accordance with its target capital structure, which;for many firms means partly as debt, partly as preferred stock, and partly;common equity.;a.True;b.False="msonormal">

Paper#44722 | Written in 18-Jul-2015

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