Question: If you use the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be? Risk

If you use the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be?

Risk free
Treasury Bond 0.07
Bonds Data
inflation (5 years) 0.02
inflation (next 5) 0.01
MRP (formula) 0.001 X (tm-1) tm = maturity
DRP 0.001
LP 0.001
Maturity 10
Bonds outstanding (semi annual)
Currrent Price $1,154
coupon rate 12.0%
Years to Maturity 15
Par Value 1000
Preferred stock
Par value $100
Dividend Rate 10.0%
Current price $111
Common Stock
Current price $50.00
Last dividend $4.19
Growth rate 5.0%
Beta 1.2
Market return 13%
Consultant's Forecasts of the project's returns
Economic Conditions Prob Return
Strong 50% 20%
Normal 30% 10%
Weak 20% -28%
a.

9.6%
b.

5.5%
c.

2.2%
d.

12.5%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Q:

1 . What is the Yield - To - Maturity of the current bonds outstanding? 2 . Suppose your outside consultant disputes the market price of bonds number. She estimates that it is somewhere between $ 9 0...

Q:

leadership reflection assigIf you use the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be? Group of answer choices 2.2% 5.5% 8.2%...

Q:

leadership reflection assigIf you use the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be? Group of answer choices 2.2% 5.5% 8.2%...

Q:

If you use the Risk - Free + Premium method for calculating the cost of debt ( or expected return on debt ) , what would the answer be ?

Q:

Using the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be? a. 9.6% b. 5.5% c. 2.2% d. 12.5% Risk free Treasury Bond 0.07 Bonds Data...

Q:

Using the Risk-Free + Premium method for calculating the cost of debt (or expected return on debt), what would the answer be? a. 9.6% b. 5.5% c. 2.2% d. 12.5% Risk free Treasury Bond 0.07 Bonds Data...

Q:

Question 1 Which of the following are benefits of establishing an investment policy statement? It provides a disciplined strategic investment map It supports a paper trail It provides guidance in the...

Q:

Please see the snap photo below for further instructions. thank you 1. Read the Electrolux and GE Applianceh 2. \"the Excel spreadsheet template prov1 e posted N 3 Answer the following questions....

Q:

Please see the snap photo below for further instructions. thank you 1. Read the Electrolux and GE Applianceh 2. \"the Excel spreadsheet template prov1 e posted N 3 Answer the following questions....

Q:

Please see the snap photo below for further instructions. thank you and be safe Exhibit 7. Valuation of GE Appliances Using DCF Analysis (millions of US dollars) GE Appliances Actual Actual*...

Q:

Find the Fourier transform of the function f (t) = e-a|t|.

Q:

The growth mutual fund (currently valued at $13,900) had been acquired by Nicholas over the years 2016, 2017, 2018, 2019, 2020, and 2021 with deposits of $1,000, $1,000, $2,000, $2,000, $2,500, and...

Q:

The domain of arctan ( 2 x 4 ) arctan ( 2 x 4 ) is: A . x ( 1 2 ) 1 / 4 x ( 2 1 ) 1 / 4 B . ( 1 2 ) 1 / 4 x ( 1 2 ) 1 / 4 ( 2 1 ) 1 / 4 x ( 2 1 ) 1 / 4 C . x ( 1 2 ) 4 x ( 2 1 ) 4 D . ( 4 ) 1 / 4 x (...

Q:

1.Assuming a perpetual inventory system is used, use the following information to calculate cost of goods sold on an average-cost basis. (7 points) Dec. 1 Beginning inventory 50 units @ $22 9...

Q:

1. What is the central bank likely to undertake and how will this affect the value of the euro? 2. Without using an exchange rate model, what is your prediction for the one year forward rate given...

Q:

On January 1, 2014, Grgante Corporation purchased 25% of the common stock outstanding of Sheat Corporation for $270,000. During 2014, Long Corporation reported net income of $80,000 and paid cash...

Q:

Take a moment to write down 1 goal in your life (within this year), and apply the SMART framework. What is that goal? Specific Measurable Attainable/Achievable Realistic Timely

Q:

2. In this chapter, the reader should reflect on the following concepts: Context, winwin, win-lose, ambiguity, mental model, point of reference.

Q:

2. In this chapter, the reader should reflect on the following concepts: Patterns, symmetrical relationships, complementary relationships.

Q:

1. To provide insight into how setting an overly narrow boundary can give a mes-sage a specific meaning, while setting a wider boundary can give a completely different meaning.