1. Consider a stock that is expected to pay a dividend of $2.44 one year from now. The dividend is expected to grow at a constant rate of 4.9% per year forever. Firms in the same industry provide an expected rate of return of 10.6%. What is the current price of the stock?
2. What is the price of a bond with a coupon rate of 4%, payable annually, a face value of $1000, 10 years to maturity, and a yield to maturity of 4.4%?
3. Consider a firm that has a debt-equity ratio of 1/2. The rate of return for debt is 7% and the rate of return for equity is 12%. The corporate tax rate is 31%. What is the weighted average cost of capital? Enter your answer as a percentage and rounded to 2 DECIMAL PLACES.
4. A company has issued preferred stock with an annual dividend of$1.61 that will be paid in perpetuity. The current price of the stock is $23.53. What is the expected rate of return on the preferred stock? Enter your answer as a percentage.