vv-21 - Ch 9 In Class Drill Problems - WACC 0. The...

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

View Full Document Right Arrow Icon
Ch 9 In Class Drill Problems - WACC 0. The preferred stock of North Coast Shoreline pays an annual dividend of $1.70 and sells for $20.24 a share. What is the rate of return on this security? a. 5.95 percent b. 7.08 percent c. 8.40 percent d. 11.90 percent e. none of the above R = $1.70 ÷ $20.24 = 8.40 percent 1. Martin Industries just paid an annual dividend of $1.20 a share. The market price of the stock is $26.60 and the growth rate is 4 percent. What is the firm’s cost of equity? a. 8.38 percent b. 8.51 percent c. 8.57 percent d. 8.69 percent e. none of the above 2. Ben’s Ice Cream just paid their annual dividend of $.75 a share. The stock has a market price of $32 and a beta of .90. The return on the U.S. Treasury bill is 4 percent and the market has a 12 percent rate of return. What is the cost of equity? a. 7.24 percent b. 8.67 percent c. 11.20 percent d. 12.92 percent e. none of the above R e = .04 + .90 × (.12 – .04) = 11.20 percent 3. Ernst’s Electrical has a bond issue outstanding with ten years to maturity. These bonds
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/07/2011 for the course BUS M 301 taught by Professor Jimbrau during the Winter '11 term at BYU.

Page1 / 3

vv-21 - Ch 9 In Class Drill Problems - WACC 0. The...

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

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