Estimate your firm's Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.6%, the market risk premium is 5.4%, and the corporate tax rate is 21%. ØDebt: . Total book value: $10 million Total market value: $18 million Coupon rate: 5% Yield to Maturity: 4% Ø Common Stock: Total book value: $12 million Total market value: $16 million Beta 1.1 ØPreferred Stock: Total book value: $1 million Total market value: $6.5 million

Estimate your firm's Weighted Average Cost of Capital. Assume that the current risk-free rate of interest is 3.6%, the market risk premium is 5.4%, and the corporate tax rate is 21%. ØDebt: . Total book value: $10 million Total market value: $18 million Coupon rate: 5% Yield to Maturity: 4% Ø Common Stock: Total book value: $12 million Total market value: $16 million Beta 1.1 ØPreferred Stock: Total book value: $1 million Total market value: $6.5 million

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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Roundall dollar answers to 2 decimal places and record all interest rate, coupon rate and growth rate answers as a percentrounded to one decimal place 50. Suppose the risk-free rate is 2.20% and analysts estimate that the market risk premium is 5.50%. Firm A justpaid a dividend of $1.80 per share. The analyst estimates the β of Firm A to be 1.22 and estimates the dividendgrowth rate to be 4.36% forever. If Firm A has 200,000 shares of common stock outstanding, what is the totalmarket value of Firm A’s equity (i.e., price per share times number of shares outstanding)? (Round youranswer up to the nearest whole number (i.e., no decimal places); for example, enter 112,304.874 or112,304.128 as 112305).
Suppose the market risk premium is 5% and the risk-free interest rate is 5%. Using the data in the table here, a. Starbucks's stock. b. Hormel's stock. c. Avis Budget Group's stock. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Hormel 0.16 Avis Budget Group 2.55 Beta Starbucks 1.05 X " calculate the expected return of investing in
Assume perfect capital markets. A firm has a market value of $30, 000 and debt of $7, 500 horrowed at 7%. The return on equity is 18%. What is the return on equity if the firm was unlevered? (Hint: Think about WACC, WACCL = WACCU)
Margin %: Your margin account requires an initial margin of 50%, and a maintenance margin of 30%. You deposit $83,000 cash in a brokerage account and purchase stocks using all available margin and borrowing the rest from your broker. Later, the value of your stock holdings rises to $184,000. What is your percent return? O. 100.00% O. 10.84% O. 121.69% O. 21.69%
The investment funds for your company includes the following: Stock $ Amount Invested Beta for Each Stock A $ 600,000 .8 B $ 1,800,000 1.4 C $ 2,400,000 1.7 D $ 700,000 -.6 E $ 3,000,000 1.1 You need to calculate the required rate of return for the investment. The market’s required return for Year 2020 is 12% and the risk free rate is 3% Show your work on the following: Calculate the average beta for the portfolio. Calculate the required rate of return for the entire portfolio. The CFO of your company is anticipating that the stock market will be decreasing in the near future. Please give a recommendation on which stock the company should sell and which stock the company should buy. The CFO also wants you to explain your answer.
Assume that the CAPM is true, Rf = 5%, Rm= 15% σm = 0.1. An investor with $10,000 to invest builds a portfolio, Q, of T-bills and the market portfolio. This means that: a) it would be possible for the investor to obtain a return of 17% on portfolio Q b) if portfolio Q were composed of short-selling $2,000 in T-bills and the remainder is the market portfolio, then Pqm = 1, βq = 1.2 and σq = 0.12 c) to obtain a return of 17% from portfolio Q the investor would need to invest $12,000 in the market portfolio d) all of the above are true e) only a) and b) above are true. Pls show procedure, thanks
The Rhaegel Corporation's common stock has a beta of 1.2.f the risk-free rate is 5 percent and the expected return on the market is 14 percent, what is the company's cost of equity capital? Multiple Choice 15.8% 16.59% 15.01% 16.43% 21.8%

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