The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.Assets$ 38,000,000101,000,000$139,000,000Current assetsNet plant, property, and equipmentTotal assetsLiabilities and EquityAccounts payable$ 10,000,0009,000,000$ 19,000,00040,000,000$ 59,000,000AccrualsCurrent liabilitiesLong-term debt (40,000 bonds, S1,000 par value)Total liabilitiesCommon stock (10,000,000 shares)Retained earningsTotal shareholders' equityTotal liabilities and shareholders' equity30,000,000_50,000,000_80,000,000$139,000,000The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%.The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%.Answer each of the Questions in the two and a half hours permitted. Adams Inc. has the following data: r RE = 5.00%; RP M = 6.00%; and b = 1.05. What is the firm's cost of common from reinvested earnings based on the CAPM?11.30%11.64%11.99%12.35%12.72%

Given: Risk free rate = 5% Market risk premium = 6% Beta = 1.05

Answered: Adams Inc. has the following data: r RF…

Adams Inc. has the following data: r RF = 5.00%; RP M = 6.00%; and b = 1.05. What is the firm's cost of common from reinvested earnings based on the CAPM? 11.30% 11.64% 11.99% 12.35% 12.72% 00000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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