eoc_chapter_12 - Chapter 12 Problems 1-30 Input boxes in...

Info iconThis preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 12 Problems 1-30 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 1 Input Area: Dividend per share $1.90 Growth rate 6% Stock price $38.00 Output Area: Cost of equity 11.30%
Background image of page 2
Chapter 12 Question 2 Input Area: Beta 1.27 Risk-free rate 5% Market return 13% Output Area: Cost of equity 15.16%
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 3 Input Area: Beta 1.20 T-bill rate 5.5% Market risk premium 7% Dividend per share $2.20 Growth rate 5% Stock price $36.00 Output Area: R(E) - CAPM 13.90% R(E) - DCF 11.42% R(E) 12.66%
Background image of page 4
Chapter 12 Question 4 Input Area: Dividend just paid $1.56 Stock price $38.00 Dividends: Year 1 $1.10 Year 2 $1.20 Year 3 $1.32 Year 4 $1.43 Output Area: g(1) 9.09% g(2) 10.00% g(3) 8.33% g(4) 9.09% Average g 9.13% R(E) 13.61%
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 5 Input Area: Dividend per share $6.50 Stock price $90.00 Output Area: R(p) 7.22%
Background image of page 6
Chapter 12 Question 6 Input Area: Settlement date 1/1/02 Maturity date 1/1/09 Annual coupon rate 8.50% Coupons per year 2 Face value (% of par) 100.0 Bond price (% of par) 106.0 Tax rate 38% Output Area: Pretax cost of debt 7.387% Aftertax cost of debt 4.580%
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 7 Input Area: Settlement date 1/1/02 Maturity date 1/1/24 Annual coupon rate 6.00% Coupons per year 2 Face value (% of par) 100.0 Bond price (% of par) 96.0 Tax rate 35% Output Area: a. Pretax cost of debt 6.340% b. Aftertax cost of debt 4.121% c. The aftertax rate is more relevant because that is the actual cost to the company.
Background image of page 8
Chapter 12 Question 8 Input Area: Book value of debt issue (1) $30,000,000 Second issue Settlement date 1/1/02 Maturity date 1/1/12 Annual coupon rate 0% Coupons per year 1 Face value (% of par) 100.0 Bond price (% of par) 56.0 Tax rate 35% Book value debt issue (2) $80,000,000 Output Area: Book value of debt $110,000,000 Market value of debt $73,600,000 Pretax cost of second issue 5.970% Aftertax cost of seconf issue 3.880% Company's aftertax cost of debt 3.974%
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 9 Input Area: Common stock weight 65% Preferred stock weight 10% Debt weight 25% Cost of equity 15.00% Cost of preferred stock 6.00% Cost of debt 7.50% Tax rate 35% Output Area: a. WACC 11.57% b. Since interest is tax deductible and dividends are not, we must look at the after-tax cost of debt, which is: 4.88% Hence, on an aftertax basis, debt is cheaper than the preferred stock.
Background image of page 10
Chapter 12 Question 10 Input Area: Debt-to-equity ratio 0.80 Cost of equity 17% Cost of debt 8% Tax rate 35% Output Area: WACC 11.76%
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 12 Question 11 Input Area: WACC 12.40% Cost of equity 15% Cost of debt 8% Tax rate 35% Output Area: D/E 0.3611
Background image of page 12
Chapter 12 Question 12 Input Area: Shares outstanding 9,000,000 Market price per share $52 Book value per share $4 Bond (I) par value $80,000,000 Coupon rate 8.00% % of par 104% Maturity 10 Bond (II) par value $50,000,000 Coupon rate 7.50% % of par 102% Maturity 6 Output Area: a. BV(E) $36,000,000 BV(D) $130,000,000 V $166,000,000 E/V 0.2169 D/V 0.7831 b. MV(E) $468,000,000
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 39

eoc_chapter_12 - Chapter 12 Problems 1-30 Input boxes in...

This preview shows document pages 1 - 14. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online