The expected return on the market is 12.36 %, the risk-free rate is 4.88 %, and the tax rate is 18.00 %. Semper Fun Sports has 310,000 common sharesoutstanding that are priced at $40.20 per share and have an expected return of 16.96 % and an expected real return of 14.62 %. Last year, Semper Fun Sportscommon stock had a return of 11.66 %. The company also has 411,000 shares of preferred stock outstanding that are priced at $15.50 per share and have anexpected return of 13.36 % and an expected real return of 11.81%. Last year, Semper Fun Sports preferred stock had a return of 13.36%. Finally, the companyhas 10,000 bonds outstanding with a coupon rate of 9.69 %, yield-to-maturity of 4.70%, current yield of 8.44%, face value of $1,000.00, and price of $1,260.00.What is the weighted average cost of capital for Semper Fun Sports?9.73% (plus or minus 0.02 percent)O 11.32% (plus or minus 0.02 percent)12.21% (plus or minus 0.02 percent)10.98% (plus or minus 0.02 percent)None of the above is within .02 percentage points of the correct answer

Step 1: The steps are as follows: Sl. No.AB1Equity Shares 310,000.00 2Equity Price…

Answered: The expected return on the market is…

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

See similar textbooks

Similar questions

Steve's Specialties, Inc. paid its dividend yesterday, which as $3.00. The dividend has been growing at a rate of 0.035 and is expected to continue indefinitely at that rate. Steve's common stock is currently trading at 24.00 per share. The firms beta is 0.88. Treasuries (T-bills) are currently yielding 0.030, Average return on the market is 0.10. Using the DCF approcah, what is steves cost of retained earnings?
Saeed Construction’s CFO has the following information to estimate the company’s weighted average cost of capital:The company currently has 20-year, 8.5% semi-annual coupon bonds that currently sells for Rs.945.The company’s stock has a beta of 0.80.The market risk premium, RPm , equals 3%.The risk-free rate is 2.4% and market rate is 5.4%. The company’s growth (g) = 0%, stock price (P0) = Rs.50, current dividend (D0) = Rs.2 and additional/new equity flotation cost = 15%.The company has outstanding preferred stock that pays a Rs.2.00 annual dividend. The preferred stock sells for Rs.25 a share.The company’s tax rate is 40%. The company’s capital structure consists of 40% long-term debt, 40% common stock, and 20% preferred stock. Requirement: Calculate Component cost of debt, cost of equity, cost of preferred stock and weighted average cost of capital.
Tyres Limited has asked you to calculate the return on its ordinary shares to help in its calculation of its weighted average cost of capital (WACC). Tyres has 10,000,000 ordinary shares on issue that have a beta of 1.63. The last dividend was $9.56, and dividends have been growing at 2.7% per year. If the risk-free rate is 1.98% and the return on the market is 9.1%. What is the required return on one of Tyres’s ordinary shares?.
Ripple Wine Merchants has 10,700 shares of stock outstanding at a price per share of $63. The risk-free rate is 2.8% and the expected market return is 9.8 %. Ripple has a beta of 1.59. The company also has 320 bonds outstanding, with a par value of $1000 per bond. The after-tax cost of debt is 5.89% and the bonds sell for 93.6% of par. What is the firm's WACC if the tax rate is 21%? O Multiple Choice 9.52% 9.44% 9.78% 9.14%
Circuit City Stores (CC) recently paid a $.16 dividend. The dividend is expected to grow at a 23 percent rate. At the current stock price of $7.96, what is the return shareholders are expecting?
The current yield on stock invested in Lynx Corporation is 4.2%. The dividend last year was $3.25 per share. What was the selling price of the stock?
Monsters inc recently paid its annual dividend of $2.47 and reported an ROE of 6%. The firm pays out 50% of earnings as dividends. Based on your analysis, you estimate that the stock has a required return of 7%. What is the intrinsic value of this stock?
Fesla just paid a dividend of $3.5 per share and it is expected to grow 16% each year for the next 3 years. After that, dividends will have a constant growth of 3% annually. The required rate of return for this stock is 10%. Given this information, what would be the share price for this firm? Round your answer to two decimals and enter your answer in the box below. You Answered 72.08 Correct Answer 60.4 margin of error +/- 0.5
Handy Handbags (HH) recently paid a dividend of $2.00 (D0), which is expected to grow at 7%. HH’s stock price is $23, its beta is 1.6, the yield on its bonds is 12%, and the risk premium on the company’s own stock is 5%. The risk-free rate is 6% and the market risk premium is 4%. Flotation costs will be 10% if Handy issues new common stock. Using the discounted cash flow method, compute the cost of retained earnings for HH: Question 13 options: 13.3% 18.4% 16.3% 15.7%
XYZ corp expects to earn $3.9 per share next year and plow back 35.9% of its earnings (i.e., it expects to pay out a dividend of $2.5 per share, representing 64.1% of its earnings). The dividends are expected to grow at a constant sustainable growth rate and the stocks are currently priced at $30 per share. How much of the stock's $30 price is reflected in Present Value of Growth Opportunities (PVGO) if the investors' required rate of return is 20%? $_________
Belotti Company just paid a dividend of $1.67 per share to its stockholders. Market analysts believe Belotti Company will grow by 19 percent next year, 13.75 percent the following year, and 13 percent the year after. Then, it is projected that Belotti Company will grow at a constant rate of 4.75 percent per year indefinitely. The current rate of interest on risk-free asset is 2.51 percent and the rate of return on market portfolio is 11.25 percent. Belotti Company’s beta is estimated to be 1.09. What is your estimate of the current market price of Belotti Company’ stock?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS