Assuming the following: 1.4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Outstanding debt Of $150mm 8. After-tax cost of debt of 6% 9. Current share price of $125 10. Tax rate of 25% 11. EBITDA Multiple of 7x.

Assuming the following: 1.4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Outstanding debt Of $150mm 8. After-tax cost of debt of 6% 9. Current share price of $125 10. Tax rate of 25% 11. EBITDA Multiple of 7x.

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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Avril will pay a dividend of $2 per share starting from year 6 and the growth rate is 10%, assume no dividends before year 6, what is its present value if its return on equity is 18.2%? A. 8.94 B. 2.14 C. 12.89 D. 1.71
Given the following information: Percent of capital structure: Debt Preferred stock Common equity (retained earnings) Additional information: Bond coupon rate Bond yield to maturity Dividend, expected common Dividend, preferred Price, common Price, preferred Flotation cost, preferred Growth rate Corporate tax rate 13% 11% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 7.00 $ 14.00 $ 70.00 $110.00 $ 2.50 30% 10% 5 85 Calculate the Hamilton Corp's weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Weighted Cost %
Easttown Productions just paid an annual dividend of $7.85 per share. Future dividends are expected to increase by 2 percent annually. What is one share of this stock worth at a required rate of return of 12.25 percent? A. $78.12 B. $100.88 C. $95.02 D. $76.59 E. $64.08
North Side Corp’s dividends for year 1, year 2, year 3, and expected share price for year 3 are: D1=$1.95, D2=$2.10, D3=$2.18, and P3=$95 respectively. What is the company’s current share price given the required return of 8 percent?
Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. What is the cost of internal common equity (retained earnings) if the long-term growth in dividends is projected to be 9 percent indefinitely? a. 15 percent b. 14 percent c. 16 percent d. 13 percent
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate Dividend, preferred Dividend, expected common Price, preferred Growth rate Bond yield Flotation cost, preferred Price, common 15% 45 40 35% Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital $ 8.00 $ 3.50 $ 105.00 98 8% $ 10.40 $ 78.00 Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Weighted Cost 5.20 % 8.33 11.50 25.03 %
Given the following information: Percent of capital structure: Debt 35% Preferred stock 20 Common equity (retained earnings) 45 Additional information: Bond coupon rate 11% Bond yield to maturity 9% Dividend, expected common $ 5.00 Dividend, preferred $ 12.00 Price, common $ 60.00 Price, preferred $ 106.00 Flotation cost, preferred $ 4.50 Growth rate 6% Corporate tax rate 25% Calculate the Hamilton Corporation's weighted cost of each source of capital and the weighted average cost of capital. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.
Given the following information, calculate the WACC. Capital Structure: Debt = 40% Pref Stock = 20% Common St = 40% Additional Information: Corporate Tax rate Preferred Dividend 25% $8.50 %3D Expected Common Dividend = $2.50 $105.00 Preferred Price= Growth Rate = 7% 9.5% Bond Yield = Preferred Floatation Cost = $3.60 $75.00 Common Stock Price=
Question 5: The Holmes company's yearend balance sheet is shown below. Its cost of common equity is 12%, its before tax cost of debt is 12% and its marginal tax rate is 35%. Assume that the firm long term debt sells at par value. The firm total debt, which is the sum of the company short term debt and long term debt, equal $2820. The firm has 600 share of common stock outstanding that sells for $5.00 per share. Calculate Holmes WACC using market value weights. Assets Equities Cash 200 Account receivable 156 Equipment 5964 Total Assets 6320 Short term debts Long term debts Common equity Total Equities 520 2300 3500 6320
Financials of X Ltd are as follows. 10% Debt 6500; Current Market Price 80.21; Equity Beta 1.25; Equity Capital (Rs 10) 1900; Market Risk Premium 6; PAT 1235; Retained Earnings 4100; Risk Free Return 7%; Tax 35%. Find market value added. a. Rs 9329.30 b. Rs 9932.90 c. Rs 9239.90 d. Rs 9329.90
The following financial information is available on Raytheon Technologies: Current per share market price: $225.00 Current (t = 0) per share dividend: $28.00 Expected long-term growth rate: 8.50% Raytheon Technologies can issue new common stock to net the company $205.00 per share. Determine the cost of external equity capital using the dividend capitalization model approach. 22.16% 20.94% 23.32% 22.00%
Percent of capital structure: Preferred stock Common equity (retained earnings) Debt Additional information: Corporate tax rate 45 25 15% 40 35% Dividend, preferred $ 10.00 Dividend, expected common $ 5.50 Price, preferred $ 98.00 Growth rate 10% Bond yield 11% Flotation cost, preferred $ 8.20 $ 77.00 Price, common Calculate the weighted average cost of capital for Digital Processing Incorporated Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Debt Preferred stock Common equity (retained earnings) Weighted average cost of capital Weighted Cost 7.15% 11.14x 7.86 X 26.15 %

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