6. A company just paid a dividend of $6.55 on its common stock at the end...
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6. A company just paid a dividend of $6.55 on its common stock at the end of last year. Dividends next year are expected to be $6.67 and $6.73 the year after that. You believe you can set the stock then for $14.96. If you required rate of return in the stock is 19%. How much are you willing to pay for the stock today? 7. A company has common stock is selling for $71.82 per share. The last dividend was $0.13 and dividends are expected to grow at an annual rate of 5% indefinitely. Flotation cost on new stock sells are 70% of the selling price. What is the cost of the company new common stock? submit your answer as a percentage and round to two decimal places 8. A corporate bond has a fare value of $1,000 and coupon rate of 6.5% paid semiannually. The bond matures 18 years and has a current market price of $911 if the corporate sell more bonds, it will incur flotation costs of $64 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital? 9. Beginning with an investment in one company securities, as we add securities of other companies to our portfolio, which type of risk declines? 10. A project with an initial outlay of $12,000 is expected to generate $3,000 in year one, $6,000 in year two, $1,000 in year three, and $12,000 in year four. Required rate of return is 8%. What is the payback period of this project? 6. A company just paid a dividend of $6.55 on its common stock at the end of last year. Dividends next year are expected to be $6.67 and $6.73 the year after that. You believe you can set the stock then for $14.96. If you required rate of return in the stock is 19%. How much are you willing to pay for the stock today? 7. A company has common stock is selling for $71.82 per share. The last dividend was $0.13 and dividends are expected to grow at an annual rate of 5% indefinitely. Flotation cost on new stock sells are 70% of the selling price. What is the cost of the company new common stock? submit your answer as a percentage and round to two decimal places 8. A corporate bond has a fare value of $1,000 and coupon rate of 6.5% paid semiannually. The bond matures 18 years and has a current market price of $911 if the corporate sell more bonds, it will incur flotation costs of $64 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital? 9. Beginning with an investment in one company securities, as we add securities of other companies to our portfolio, which type of risk declines? 10. A project with an initial outlay of $12,000 is expected to generate $3,000 in year one, $6,000 in year two, $1,000 in year three, and $12,000 in year four. Required rate of return is 8%. What is the payback period of this project?
Expert Answer:
Answer rating: 100% (QA)
6 To calculate the present value of the stock you can use the dividend discount model formula Price Div1 r g P1 1r1 P2 1r2 Where Div1 next years divid... View the full answer
Related Book For
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank
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