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Question;[i]. Bouchard;Company's stock sells for \$20 per share, its last dividend (D0) was;\$1.00, and its growth rate is a constant 6 percent. What is its cost of common stock, rs?;a.;5.0%;b.;5.3%;c. 11.0%;d. 11.3%;e. 11.6%;[ii]. Your;company's stock sells for \$50 per share, its last dividend (D0) was;\$2.00, and its growth rate is a constant 5 percent. What is the cost of common stock, rs?;a.;9.0%;b.;9.2%;c.;9.6%;d.;9.8%;e. 10.0%;[iii]. The;Global Advertising Company has a marginal tax rate of 40 percent. The last;dividend paid by Global was \$0.90.;Global's common stock is selling for \$8.59 per share, and its expected;growth rate in earnings and dividends is 5 percent. What is Global's cost of common stock?;a. 12.22%;b. 17.22%;c. 10.33%;d.;9.66%;e. 16.00%;Answer: a;[iv]. An analyst has collected;the following information regarding Christopher Co.;?;The;company?s capital structure is 70 percent equity, 30 percent debt.;?;The;yield to maturity on the company?s bonds is 9 percent.;?;The;company?s year-end dividend is forecasted to be \$0.80 a share.;?;The;company expects that its dividend will grow at a constant rate of 9 percent a;year.;?;The company?s;stock price is \$25.;?;The;company?s tax rate is 40 percent.;?;The;company anticipates that it will need to raise new common stock this year. Its investment bankers anticipate that the;total flotation cost will equal 10 percent of the amount issued. Assume the company accounts for flotation;costs by adjusting the cost of capital.;Given this information, calculate the company?s WACC.;a. 10.41%;b. 12.56%;c. 10.78%;d. 13.55%;e.;9.29%;Medium;[v]. A company?s balance sheets show a total of;\$30 million long-term debt with a coupon rate of 9 percent. The yield to maturity on this debt is 11.11;percent, and the debt has a total current market value of \$25 million. The balance sheets also show that that the;company has 10 million shares of stock, the total of common stock and retained;earnings is \$30 million. The current;stock price is \$7.5 per share. The;current return required by stockholders, rS, is 12 percent. The company has a target capital structure of;40 percent debt and 60 percent equity.;The tax rate is 40%. What;weighted average cost of capital should you use to evaluate potential projects?;a. 8.55%;b. 9.33%;c. 9.36%;d. 9.87%;e. 10.67%;[vi]. 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%;[vii]. Martin;Corporation's common stock is currently selling for \$50 per share. The current;dividend is \$2.00 per share. If;dividends are expected to grow at 6 percent per year, then what is the firm's;cost of common stock?;a. 10.0%;b. 10.2%;c. 10.6%;d. 10.8%;e. 11.0%;[viii]. 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%;[ix]. Johnson;Industries finances its projects with 40 percent debt, 10 percent preferred;stock, and 50 percent common stock.;?;The;company can issue bonds at a yield to maturity of 8.4 percent.;?;The;cost of preferred stock is 9 percent.;?;The;company's common stock currently sells for \$30 a share.;?;The;company's dividend is currently \$2.00 a share (D0= \$2.00), and is;expected to grow at a constant rate of 6 percent per year.;?;Assume;that the flotation cost on debt and preferred stock is zero, and no new stock;will be issued.;?;The;company?s tax rate is 30 percent.;What is the company?s weighted average cost;of capital (WACC)?;a.;8.33%;b.;9.32%;c.;9.79%;d.;9.99%;e. 13.15%;[x]. Dobson Dairies has a;capital structure which consists of 60 percent long-term debt and 40 percent;common stock. The company?s CFO has;obtained the following information;?;The before-tax yield to;maturity on the company?s bonds is 8 percent.;?;The company?s common stock is;expected to pay a\$3.00 dividend at year end(D1 =;\$3.00), and the dividend is expected to grow at a;constant rate of7 percent a year. The common stock currently;sells for \$60a share.;?;Assume the firm will be able to;use retained earnings to fund the equity portion of its capital budget.;?;The;company?s tax rate is 40 percent.;What is the company?s;weighted average cost of capital (WACC)?;a. 12.00%;b. 8.03%;c. 9.34%;d. 8.00%;e.;7.68%

Paper#50977 | Written in 18-Jul-2015

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