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Question;9)Lanser Inc. hired you as a consultant to help them estimate its cost of capital. You have been provided with the following data: D1 = $0.80, P0 = $22.50, and g = 5.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?a.7.34%b.7.72%c.8.13%d.8.56%e.8.98%Component10)You were hired as a consultant to Kroncke Company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 13.25%. The firm will not be issuing any new stock. What is its WACC?a.9.48%b.9.78%c.10.07%d.10.37%e.10.68%11);To help finance a major expansion;Delano Development Company sold a noncallable bond several years ago that now;has 15 years to maturity. This bond;has a 10.25% annual coupon, paid semiannually, it sells at a price of $1,025;and it has a par value of $1,000. If Delano?s tax rate is;40%, what component cost of debt should be used in the WACC calculation?;a.;5.11%;b.;5.37%;c.;5.66%;d.;5.96%;e.;6.25%;12);Chambliss Inc. hired you as a;consultant to help estimate its cost of capital. You have been provided with the following;data: D0 = $0.90, P0;= $27.50, and g = 8.00% (constant).;Based on the DCF approach, what is the cost of equity from retained;earnings?;a.;10.41%;b.;10.96%;c.;11.53%;d.;12.11%;e.;12.72%;13);You were recently hired by Nast;Media Inc. to estimate its cost of capital.;You were provided with the following data: D1 = $2.00, P0 = $55.00;g = 8.00% (constant), and F = 5.00%.;What is the cost of equity raised by selling new common stock?;a.;11.24%;b.;11.83%;c.;12.42%;d.;13.04%;e.;13.69%;14);Schadler Systems is expected to;pay a $3.50 dividend at year end (D1 = $3.50), the dividend is;expected to grow at a constant rate of 6.50% a year, and the common stock;currently sells for $62.50 a share.;The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of;40% debt and 60% common equity. What;is the company?s WACC if all equity is from retained earnings?;a.;8.35%;b.;8.70%;c.;9.06%;d.;9.42%;e.;9.80%;15);Roxie Epoxy?s balance sheet shows;a total of $50 million long-term debt with a coupon rate of 8.00% and a yield;to maturity of 7.00%. This debt;currently has a market value of $55 million.;The balance sheet also shows that that the company has 20 million;shares of common stock, and the book value of the common equity (common stock;plus retained earnings) is $65 million.;The current stock price is $8.25 per share, stockholders' required;return, rs, is 10.00%, and the firm's tax rate is 40%. Based on market value weights, and assuming;the firm is currently at its target capital structure, what WACC should Roxie;use to evaluate capital budgeting projects?;a.;7.26%;b.;7.56%;c.;7.88%;d.;8.21%;e.;8.55%;16);Assume that you are on the;financial staff of Michelson Inc., and you have collected the following;data: (1) The yield on the company?s;outstanding bonds is 8.00%, and its tax rate is 40%. (2) The next expected dividend is $0.65 a;share, and the dividend is expected to grow at a constant rate of 6.00% a;year. (3) The price of Michelson's;stock is $17.50 per share, and the flotation cost for selling new shares is F;= 10%. (4) The target capital;structure is 45% debt and the balance is common equity. What is Michelson's WACC, assuming it must;issue new stock to finance its capital budget?;a.;6.63%;b.;6.98%;c.;7.34%;d.;7.73%;e.;8.12%


Paper#51000 | Written in 18-Jul-2015

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