Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 14, Problem 1QP
Calculating
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BASIC (Questions 1–19)
1. Calculating Cost of Equity The Pierce Co. just issued a dividend of $2.35
per share on its common stock. The company is expected to maintain a
constant 5 percent growth rate in its dividends indefinitely. If the stock sells
for $44 a share, what is the company's cost of equity?
LO 1
2. Calculatin
[EXCEL] Zero growth: Nynet, Inc., paid a dividend of $4.18 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 18.5 percent, what is the current value of the stock? Please use Excel.
2
Chapter 14 Solutions
Fundamentals of Corporate Finance
Ch. 14.1 - What is the primary determinant of the cost of...Ch. 14.1 - What is the relationship between the required...Ch. 14.2 - What do we mean when we say that a corporations...Ch. 14.2 - Prob. 14.2BCQCh. 14.3 - Why is the coupon rate a bad estimate of a firms...Ch. 14.3 - How can the cost of debt be calculated?Ch. 14.3 - How can the cost of preferred stock be calculated?Ch. 14.4 - Prob. 14.4ACQCh. 14.4 - Prob. 14.4BCQCh. 14.4 - Under what conditions is it correct to use the...
Ch. 14.5 - Prob. 14.5ACQCh. 14.5 - Prob. 14.5BCQCh. 14.6 - Prob. 14.6ACQCh. 14.6 - Why do you think we might prefer to use a ratio...Ch. 14.7 - What are flotation costs?Ch. 14.7 - How are flotation costs included in an NPV...Ch. 14 - A firm has paid dividends of 1.02, 1.10, 1.25, and...Ch. 14 - Prob. 14.3CTFCh. 14 - Why is the tax rate applied to the cost of debt...Ch. 14 - What approach to a projects costs of capital...Ch. 14 - What is the flotation cost of equity for a firm...Ch. 14 - WACC [LO3] On the most basic level, if a firms...Ch. 14 - Book Values versus Market Values [LO3] In...Ch. 14 - Project Risk [LO5] If you can borrow all the money...Ch. 14 - Prob. 4CRCTCh. 14 - DCF Cost of Equity Estimation [LO1] What are the...Ch. 14 - SML Cost of Equity Estimation [LO1] What are the...Ch. 14 - Prob. 7CRCTCh. 14 - Cost of Capital [LO5] Suppose Tom OBedlam,...Ch. 14 - Company Risk versus Project Risk [LO5] Both Dow...Ch. 14 - Divisional Cost of Capital [LO5] Under what...Ch. 14 - Calculating Cost of Equity [LO1] The Absolute Zero...Ch. 14 - Calculating Cost of Equity [LO1] The Graber...Ch. 14 - Calculating Cost of Equity [LO1] Stock in Daenerys...Ch. 14 - Estimating the DCF Growth Rate [LO1] Suppose...Ch. 14 - Prob. 5QPCh. 14 - Calculating Cost of Debt [LO2] Drogo, Inc., is...Ch. 14 - Calculating Cost of Debt [LO2] Jiminys Cricket...Ch. 14 - Prob. 8QPCh. 14 - Calculating WACC [LO3] Mullineaux Corporation has...Ch. 14 - Taxes and WACC [LO3] Lannister Manufacturing has a...Ch. 14 - Finding the Target Capital Structure [LO3] Famas...Ch. 14 - Book Value versus Market Value [LO3] Dinklage...Ch. 14 - Calculating the WACC [LO3] In Problem 12, suppose...Ch. 14 - WACC [LO3] Fyre, Inc., has a target debtequity...Ch. 14 - Prob. 15QPCh. 14 - Prob. 16QPCh. 14 - SML and WACC [LO1] An all-equity firm is...Ch. 14 - Calculating Flotation Costs [LO4] Suppose your...Ch. 14 - Calculating Flotation Costs [LO4] Caughlin Company...Ch. 14 - WACC and NPV [LO3, 5] Scanlin, Inc., is...Ch. 14 - Flotation Costs [LO4] Pardon Me, Inc., recently...Ch. 14 - Calculating the Cost of Debt [LO2] Ying Import has...Ch. 14 - Calculating the Cost of Equity [LO1] Epley...Ch. 14 - Adjusted Cash Flow from Assets [LO3] Ward Corp. is...Ch. 14 - Adjusted Cash Flow from Assets [LO3] In the...Ch. 14 - Prob. 26QPCh. 14 - Prob. 27QPCh. 14 - Flotation Costs and NPV [LO3, 4] Photochronograph...Ch. 14 - Flotation Costs [LO4] Sheaves Corp. has a...Ch. 14 - Project Evaluation [LO3, 4] This is a...Ch. 14 - Prob. 31QPCh. 14 - Prob. 1MCh. 14 - Cost of Capital for Swan Motors You have recently...Ch. 14 - Prob. 3MCh. 14 - Cost of Capital for Swan Motors You have recently...Ch. 14 - Cost of Capital for Swan Motors You have recently...
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- 2arrow_forward1. A company has just declared dividend of GH¢50 per share and this is yet to be paid. The dividend is expected to grow at 10% per annum forever, and price cum Div is GH¢700 per share. What is the cost of equity?arrow_forward2. Problem 10.04 (Cost of Equity with and without Flotation) еВook Problem Walk-Through Jarett & Sons' common stock currently trades at $24.00 a share. It is expected to pay an annual dividend of $2.50 a share at the end of the year (D1 = $2.50), and the constant growth rate is 3% a year. a. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the company issued new stock, it would incur an 8% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forward
- How can I calculate using excel? (see screenshot)arrow_forward[EXCEL] Cost of common stock: Seerex Wok Co. is expected to pay a dividend of $1.10 one year from today on its common shares. That dividend is expected to increase by 5 percent every year thereafter. If the price of Seerex common stock is $13.75, what is the cost of its common equity capital? please use excelarrow_forwardSolve thisarrow_forward
- Solve this problemarrow_forward6. Stock Valuation Suppose you know that a company's stock currently sells for $67 per share and the required return on the stock is 10.8 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per LO 1 share? Rurlchordt Corn paYs a constant $15 25 dividend on itsarrow_forwardplease answer fast i give upovotearrow_forward
- A firm just paid a dividend of $3.15. The company dividends are predicted to rise by 4.50% per year forever, and the required rate of return on a similar business is 9%. What is the fair market share price of this firm? a. $70.00 b. $76.83 c. $73.15 d. $80.59 e. $76.70arrow_forwardplease answer fast i give upvotearrow_forwardPlease use EXCEL formula to answer the question, and explain by stepsarrow_forward
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What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY