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 2QP
Calculating
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Need help with 12.2
1. Using the Capital Asset Pricing Model (CAPM),
what's this company's cost of common equity?
·Expected market return = 10%
Risk-free rate = 4%
Beta = 1.3
Please use EXCEL formula to answer the question, and explain by steps
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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- Please answer multi-choice question in photo.arrow_forwardYou know that the return of Sandhill Cyclicals common shares is 1.2 times as sensitive to macroeconomic information as the return of the market. If the risk-free rate of return is 5.00 percent and market risk premium is 5.71 percent, what is Sandhill Cyclicals’ cost of common equity capital? - Cost of common equity capital =?%arrow_forwardCost of equity: SML. Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 3.4% and the expected market return is 9.9%, what is the cost of equity for Stan if the beta of the stock is a. 0.65? b. 0.81? с. 1.09? d. 1.34? a. What is the cost of equity for Stan if the beta of the stock is 0.65? % (Round to two decimal places.)arrow_forward
- A 58.arrow_forwardonsider the following for a firm. Its stock price (P0) is at $50, its payout ratio (POR) is 0.4, its EPS1 is $2.00, and its expected return on the money retained (i) is 0.10. What is investor’s required rate of return?arrow_forwardQ1. A Corporation is trying to determine its optimal capital structure using the following table.The company estimates that the risk-free rate is 5%, the market risk premium is 6%, and its tax rate is 40%. Itestimates that if it had no debt, its beta, would be 1.2. Based on the information, what is the firm’s optimal capitalstructure, and what would the WACC be at the optimal capital structure?arrow_forward
- صورة من ??????????? ??????? ??????arrow_forwardChapter 11, Question 4arrow_forwardWhat is the intrinsic price of a stock that pays a dividend of $2.43, has a dividend growth rate of 3.5% and a Beta of 1.20? The market return is 5.15% and the risk free rate is 3%. O A. $21.84 O B. $33.66 O C. $40.67 O D. $120.92 QUESTION 18 What is the intrinsic price of a stock that pays a dividend of 60 cents, has a dividend growth rate of 4.80% and a Beta of 2.57? The market return is 7.75% and the risk free rate is 2.5%. O A. $1.22 O B. $5.62 O C. $6.19 O D. $25.39arrow_forward
- Risk free rate = 5.00%; market return = 11.00%; and beta = 1.05. How much is the firm's cost of equity based on the CAPM? 11.30% 11.64% 11.99% 12.35%arrow_forwardConsider the following security: Brous Metalworks Earnings Per Share, Time = 0 $2.00 Dividend Payout Rate 0.250 Return on Equity 0.150 Market Capitalization Rate 0.125 Required: Using the information in the tables above, please calculate the sustainable growth rate, dividends per share, and intrinsic value per share. Then solve for the present value of growth opportunities. (Use cells A5 to B8 from the given information to complete this question.) Brous Metalworks Sustainable Growth Rate Dividends per share (Next Year) Intrinsic Value No-Growth Value Per Share Present Value of Growth Opportunities (PVGO)arrow_forwardSalalah Oil,has a cost of equity capital equal to 22.8 percent. If the risk-free rate of return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta. Select one: a. None of these b. 1.20 c. 1.25 d. 1.60arrow_forward
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