{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

CH15AQZV7

CH15AQZV7 - Chapter 15 Quiz A Student Name 1 Student ID Big...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 15 Quiz A Student Name _________________________ Student ID ____________ ________ 1. Big Bird & Company just paid their annual dividend in the amount of \$1.20 a share. This dividend is expected to increase by 3 percent annually. The company’s stock is currently selling for \$26.40 per share. What is the cost of equity? a. 4.68 percent b. 4.79 percent c. 7.55 percent d. 7.68 percent ________ 2. Ernie and Bert’s has a beta of 1.24. The risk-free rate of return is 4.2 percent and the market risk premium is 8 percent. What is the cost of equity? ________ 3. The 9 percent preferred stock of Flintstone & Son is currently selling for \$64 a share. The par value per share is \$100. What is the cost of preferred stock for this firm? ________ 4. The Road Runner Co. has a bond outstanding that matures in 6 years and carries a 5 percent coupon. Interest is paid annually. The bond is currently priced at 98 percent of its face value. What is the pre-tax cost of debt? ________ 5. Your firm has a cost of equity of 12 percent and a pre-tax cost of debt of 8 percent. You maintain a debt- equity ratio of .60 and have a tax rate of 34 percent. What is your firm’s weighted average cost of capital? a. 6.93 percent b. 7.41 percent c. 9.48 percent d. 10.50 percent ________ 6. The Radiant Co. has an overall cost of equity of 12 percent and a beta of .80. The risk-free rate of return is 4 percent. The firm is considering a project with a beta of 1.23 and a four-year life. What is an appropriate cost of equity for this project? ________ 7. If a firm uses their overall weighted average cost of capital as the discount rate for all of their proposed projects, then the firm will tend to: I. become riskier over time. II. accept projects which should be rejected. III. reject projects which should be accepted. IV. see their managers propose more high risk projects and less low risk projects. ________ 8. An increase in a leveraged firm’s tax rate will: ________

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 8

CH15AQZV7 - Chapter 15 Quiz A Student Name 1 Student ID Big...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online