Exercise_6 - rate of return is 15 3 DD Company paid...

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

View Full Document Right Arrow Icon
Exercise 6 1. BB Company has the outstanding preferred stock for 20 million shares. The  PAR value is $40. BB Company promises to pay dividend at 8%. Find the value  of preferred stock for BB Company if required return is 8%? 2. The estimated EBIT for CC company is as follow Year EBIT ($) 2006 300,000 2007 400,000 2008 500,000 2009 600,000 2010 700,000   The interest expense is estimated to be $100,000 per year. The outstanding  number of preferred stock is 10,000 shares and common stock is 20,000 shares.  The Dividend for preferred stock is $1 per share. Corporate tax rate is 30%.  Dividend payout ratio is 40%. After five years, the growth rate is estimated to be constant at 5%. The required 
Background image of page 1

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

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

Unformatted text preview: rate of return is 15%. 3. DD Company paid dividend for common stock at $1 last year. The growth rate for this company is estimated to be constant at 20% for next six years. The required rate of return is 15%. Find the value of common stock if the growth rate after six years will drop instantly to 5% and will be constant perpetually. 4. The average daily return on market and daily return for stock p is as the following table. The risk-free rate is 4% Market Return Stock p return 0.030% 0.051% 0.055% 0.088% 0.120% 0.231% 0.001% 0.004% 0.009% 0.012% a. Find the average market return b. Find beta for stock p c. Find the required return on stock p...
View Full Document

This note was uploaded on 01/11/2012 for the course FINANCE fin 3701 taught by Professor Tengihla during the Spring '11 term at Assumption College.

Page1 / 2

Exercise_6 - rate of return is 15 3 DD Company paid...

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