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QUESTION 72

1. For the next 3 questions suppose the following data holds:

   Valley Imports Inc has the following financial information available.

   Risk-free rate of return = 3%	Market rate of return = 11%	Tax rate = 40%
   Before Tax Cost of debt = 8%	Debt/Total Value (i.e., D/V) = 30%	Beta = 1.40

   What is Valley Import's cost of equity?

   		12.2%
   		14.2%
   		14.8%
   		15.6%
   		16.6%

QUESTION 73

1. Continuation of the previous problem:

   Valley Imports Inc has the following financial information available.

   Risk-free rate of return = 3%	Market rate of return = 11%	Tax rate = 40%
   Before Tax Cost of debt = 8%	Debt/Total Value (i.e., D/V) = 30%	Beta = 1.40

   What is Valley Import's after-tax cost of debt?

   		4.8%
   		5.2%
   		5.6%
   		6%
   		8%

QUESTION 74

1. Continuation of the previous problem:

   Valley Imports Inc has the following financial information available.

   Risk-free rate of return = 3%	Market rate of return = 11%	Tax rate = 40%
   Before Tax Cost of debt = 8%	Debt/Total Value (i.e., D/V) = 30%	Beta = 1.40

   What is Valley Imports WACC?

   		10.24%
   		11.38%
   		12.38%
   		12.68%
   		13.62%

QUESTION 75

1. For the next 2 questions suppose the following data holds:

   Risk-free rate of interest 4%	Average equity market return 13%
   Estimated correlation of Gibson with the market 0.8
   Estimated standard deviation of Gibson's returns 40%
   Estimated standard deviation of the market's returns 20%

   Given the information provided in the table above, what is your estimate of the beta for Gibson Flowers?

   		1.12
   		1.21
   		1.4
   		1.52
   		1.6

QUESTION 76

1. Continuation of the previous problem:

   Risk-free rate of interest 4%	Average equity market return 13%
   Estimated correlation of Gibson with the market 0.8
   Estimated standard deviation of Gibson's returns 40%
   Estimated standard deviation of the market's returns 20%

   Given the information provided in the table, what is your estimate of the cost of equity for Gibson Flowers?

   		10.8%
   		13.4%
   		16.6%
   		18.4%
   		20.2%