1) The expected return of stocks is 12%. The expected return of bonds is 6%. What...

  

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1) The expected return of stocks is 12%. The expected return of bonds is 6%. What is the expected return of a portfolio that is 70% stocks and 30% bonds? Stock Valuation 2) A stock pays a $9 dividend in year 1. This dividend then grows 10% a year forever. The required rate of return for this stock is 12%. a. What is the stock's price today? b. Now assume the dividend remains constant a $9 (i.e. no growth). What is the price today? 3) A stock's dividend yield is 3.5%. The expected growth of the dividend is 4%. What is the expected return of the stock? 4) A stock pays a dividend of $4.00 in year 1, $4.25 in year 2, and $4.60 in year 3. The dividend then grows at 4% a year forever. The required return for this stock is 10%. What is the price of the stock today? Weighted Average Cost of Capital (WACC) 5) A company has a 21% tax rate. It's target capital structure is: 60% 30% Preferred Stock 10% The firm's cost for these securities is: 12% Equity Debt Equity Debt Preferred Stock 5% 7% What is the firms WACC? 1) The expected return of stocks is 12%. The expected return of bonds is 6%. What is the expected return of a portfolio that is 70% stocks and 30% bonds? Stock Valuation 2) A stock pays a $9 dividend in year 1. This dividend then grows 10% a year forever. The required rate of return for this stock is 12%. a. What is the stock's price today? b. Now assume the dividend remains constant a $9 (i.e. no growth). What is the price today? 3) A stock's dividend yield is 3.5%. The expected growth of the dividend is 4%. What is the expected return of the stock? 4) A stock pays a dividend of $4.00 in year 1, $4.25 in year 2, and $4.60 in year 3. The dividend then grows at 4% a year forever. The required return for this stock is 10%. What is the price of the stock today? Weighted Average Cost of Capital (WACC) 5) A company has a 21% tax rate. It's target capital structure is: 60% 30% Preferred Stock 10% The firm's cost for these securities is: 12% Equity Debt Equity Debt Preferred Stock 5% 7% What is the firms WACC?

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Lets address each of these financial questions one by one 1 Expected Return of a Portfolio The expected return of a portfolio can be calculated by wei... View the full answer