Question Details

[answered] 1. Award: 10.00 points The Absolute Zero Co. just issued a


Finance Homework

I need help with question # 3,6,and 7 on this PDF. Please help! I need ASAP. If you can do this I have more questions I need help with.?


1. Award: 10.00 points The Absolute Zero Co. just issued a dividend of $2.50 per share on its common stock. The company is

 

expected to maintain a constant 5.2 percent growth rate in its dividends indefinitely. If the stock sells for $50 a share, what is the company?s cost of equity? (Do not round intermediate

 

calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 10.46 % Cost of equity Hints

 

Hint #1 References

 

Worksheet Learning Objective:

 

14?01 How to

 

determine a firms

 

cost of equity

 

capital. Difficulty:

 

Basic Section: 14.2 The

 

Cost of Equity 2. Award: 10.00 points Suppose Stark Ltd. just issued a dividend of $1.91 per share on its common stock. The company paid

 

dividends of $1.60, $1.66, $1.73, and $1.84 per share in the last four years. If the stock currently sells for $45, what is your best estimate of the company?s cost of equity capital using

 

the arithmetic average growth rate in dividends? (Do not round intermediate calculations. Enter your

 

answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity 8.97 % What if you use the geometric average growth rate? (Do not round intermediate calculations. Enter

 

your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity 8.94 % References

 

Worksheet Learning Objective:

 

14?01 How to

 

determine a firms

 

cost of equity

 

capital. Difficulty:

 

Basic Section: 14.2 The

 

Cost of Equity 3. Award: 10.00 points Drogo, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to

 

maturity that is quoted at 110 percent of face value. The issue makes semiannual payments and has an

 

embedded cost of 6 percent annually. What is the company?s pretax cost of debt? (Do not round intermediate calculations. Enter your

 

answer as a percent rounded to 2 decimal places, e.g., 32.16.) Pretax cost of debt % If the tax rate is 35 percent, what is the aftertax cost of debt? (Do not round intermediate calculations.

 

Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt % Hints

 

Hint #1 References Worksheet Learning Objective:

 

14?02 How to

 

determine a firms

 

cost of debt. Difficulty:

 

Basic Section: 14.3 The

 

Costs of Debt and

 

Preferred Stock Section: 14.4 The Weighted Average

 

Cost of Capital 4. Award: 10.00 points Mullineaux Corporation has a target capital structure of 70 percent common stock, 10 percent preferred

 

stock, and 20 percent debt. Its cost of equity is 12 percent, the cost of preferred stock is 6 percent, and

 

the pretax cost of debt is 8 percent. The relevant tax rate is 40 percent. a. What is the company?s WACC? (Do not round intermediate calculations. Enter your answer as a

 

percent rounded to 2 decimal places, e.g., 32.16.) 9.96 % WACC b. What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a

 

percent rounded to 2 decimal places, e.g., 32.16.) 4.8 % Aftertax cost of debt Hints

 

Hint #1 References

 

Worksheet Learning Objective:

 

14?03 How to

 

determine a firms

 

overall cost of

 

capital and how to

 

use it to value a

 

company. Difficulty:

 

Basic Learning Objective:

 

14?04 How to

 

correctly include

 

flotation costs in

 

capital budgeting

 

projects. 5. Award: 10.00 points Lannister Manufacturing has a target debtequity ratio of .70. Its cost of equity is 14 percent, and its cost

 

of debt is 7 percent. If the tax rate is 38 percent, what is the company?s WACC? (Do not round

 

intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) WACC 10.02 % Hints

 

Hint #1 References

 

Worksheet Learning Objective:

 

14?03 How to

 

determine a firms

 

overall cost of

 

capital and how to

 

use it to value a

 

company. Difficulty:

 

Basic Section: 14.4 The

 

Weighted Average

 

Cost of Capital 6. Award: 10.00 points You are given the following information for Watson Power Co. Assume the company?s tax rate is 30

 

percent. Debt: 6,000 6.1 percent coupon bonds outstanding, $1,000 par value, 15 years to maturity,

 

selling for 104 percent of par? the bonds make semiannual payments. Common stock: 330,000 shares outstanding, selling for $51 per share? the beta is 1.07. Preferred stock: 11,000 shares of 4 percent preferred stock outstanding, currently selling for $71 per

 

share. Market:

 

6 percent market risk premium and 4.1 percent risk?free rate. What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a

 

percent rounded to 2 decimal places, e.g., 32.16.) WACC Hints

 

Hint #1 References % Worksheet Learning Objective:

 

14?03 How to

 

determine a firms

 

overall cost of

 

capital and how to

 

use it to value a

 

company. Difficulty:

 

Basic Section: 14.4 The

 

Weighted Average

 

Cost of Capital 7. Award: 10.00 points Suppose your company needs $18 million to build a new assembly line. Your target debt?equity ratio is .7.

 

The flotation cost for new equity is 7 percent, but the flotation cost for debt is only 4 percent. Your boss

 

has decided to fund the project by borrowing money because the flotation costs are lower and the needed

 

funds are relatively small. a. What is your company?s weighted average flotation cost, assuming all equity is raised externally? (Do

 

not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal

 

places, e.g., 32.16.) Flotation cost % b. What is the true cost of building the new assembly line after taking flotation costs into account? (Enter

 

your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate

 

calculations and round your answer to the nearest whole dollar amount, e.g., 32.) Amount raised $ References Worksheet Learning Objective:

 

14?04 How to

 

correctly include

 

flotation costs in

 

capital budgeting

 

projects. Difficulty:

 

Basic Section: 14.6

 

Company Valuation

 

with the WACC

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Sep 18, 2020

PRICE: $15

Solution~0001001257.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy from our tutoring website www.aceyourhomework.com (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Sep 18, 2020

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.

Order Now