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42.
Sweet Treats common stock is currently priced at $18.53 a share. The
company just paid $1.25 per share as its annual dividend. The dividends
have been increasing by 2.5 percent annually and are expected to continue
doing the same. What is this firm's cost of equity?
43.
The common stock of Metal Molds has a negative growth rate of 1.5
percent and a required return of 18 percent. The current stock price is
$11.40. What was the amount of the last dividend paid?
44.
Highway Express has paid annual dividends of $1.05, $1.20, $1.25, $1.15,
and $0.95 over the past five years, respectively. What is the average
dividend growth rate?
45.
Southern Home Cookin' just paid its annual dividend of $0.65 a share. The
stock has a market price of $13 and a beta of 1.12. The return on the U.S.
Treasury bill is 2.5 percent and the market risk premium is 6.8 percent.
What is the cost of equity?
46.
National Home Rentals has a beta of 1.24, a stock price of $22, and recently
paid an annual dividend of $0.94 a share. The dividend growth rate is 4.5
percent. The market has a 10.6 percent rate of return and a risk premium of
7.5 percent. What is the firm's cost of equity?
47.
Henessey Markets has a growth rate of 4.8 percent and is equally as risky
as the market. The stock is currently selling for $17 a share. The overall
stock market has a 10.6 percent rate of return and a risk premium of 8.7
percent. What is the expected rate of return on this stock?
48.
Tidewater Fishing has a current beta of 1.21. The market risk premium is
8.9 percent and the risk-free rate of return is 3.2 percent. By how much will
the cost of equity increase if the company expands its operations such that
the company beta rises to 1.50?
49.
Wind Power Systems has 20-year, semi-annual bonds outstanding with a 5
percent coupon. The face amount of each bond is $1,000. These bonds are
currently selling for 114 percent of face value. What is the company's pre-
tax cost of debt?
50.
Boulder Furniture has bonds outstanding that mature in 15 years, have a 6
percent coupon, and pay interest annually. These bonds have a face value
of $1,000 and a current market price of $1,075. What is the company's
aftertax cost of debt if its tax rate is 32 percent?
51.
Handy Man, Inc. has zero coupon bonds outstanding that mature in 8 years.
The bonds have a face value of $1,000 and a current market price of $640.
What is the company's pre-tax cost of debt?
52.
Dog Gone Good Engines has a bond issue outstanding with 17 years to
maturity. These bonds have a $1,000 face value, a 9 percent coupon, and
pay interest semi-annually. The bonds are currently quoted at 82 percent of
face value. What is the company's pre-tax cost of debt if the tax rate is 38
percent?
53.
The Corner Bakery has a bond issue outstanding that matures in 7 years.
The bonds pay interest semi-annually. Currently, the bonds are quoted at
101.4 percent of face value and carry a 9 percent coupon. What is the firm's
aftertax cost of debt if the tax rate is 30 percent?
54.
The outstanding bonds of Tech Express are priced at $989 and mature in 10
years. These bonds have a 6 percent coupon and pay interest annually. The
firm's tax rate is 35 percent. What is the firm's aftertax cost of debt?
55.
Simple Foods has a zero coupon bond issue outstanding that matures in 9
years. The bonds are selling at 42 percent of par value. What is the
company's aftertax cost of debt if the tax rate is 38 percent?
56.
Grill Works and More has 7 percent preferred stock outstanding that is
currently selling for $49 a share. The market rate of return is 14 percent and
the firm's tax rate is 37 percent. What is the firm's cost of preferred stock?
57.
Samuelson Plastics has 7.5 percent preferred stock outstanding. Currently,
this stock has a market value per share of $52 and a book value per share
of $38. What is the cost of preferred stock?
58.
New York Deli has 7 percent preferred stock outstanding that sells for $34 a
share. This stock was originally issued at $45 per share. What is the cost of
preferred stock?
59.
Nelson's Landscaping has 1,200 bonds outstanding that are selling for $990
each. The company also has 2,500 shares of preferred stock at a market
price of $28 a share. The common stock is priced at $37 a share and there
are 28,000 shares outstanding. What is the weight of the common stock as
it relates to the firm's weighted average cost of capital?
60.
Mangrove Fruit Farms has a $250,000 bond issue outstanding that is selling
at 92 percent of face value. The firm also has 1,500 shares of preferred
stock and 15,000 shares of common stock outstanding. The preferred stock
has a market price of $35 a share compared to a price of $24 a share for the
common stock. What is the weight of the preferred stock as it relates to the
firm's weighted average cost of capital?
61.
Electronics Galore has 950,000 shares of common stock outstanding at a
market price of $38 a share. The company also has 40,000 bonds
outstanding that are quoted at 106 percent of face value. What weight
should be given to the debt when the firm computes its weighted average
cost of capital?
