1 P 12 Ans A D 1 125 g 55 P 5300 Total Return OR r s 786 D 1 P g 13 Ans C

# 1 p 12 ans a d 1 125 g 55 p 5300 total return or r s

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1 / P 0 )
12. Ans: A D 1 = \$1.25 g = 5.5% P 0 = \$53.00 Total Return OR r s = 7.86% ( D 1 P 0 ) + g 13. Ans: C Preferred Dividend = \$8.50 Required Return = 6.5% Preferred Price = \$130.77 ( D p / R p ) 14. Ans: D D 1 = \$1.25 b = 1.10 r RF = 4.00% RP M = 5.50% g = 6.00% r s = 10.05% ( r RF + b ( RP M )) P 0 = \$30.86 ( D 1 /( r S – g )) 15. Ans: E Preferred Stock Price = \$132.50 Preferred Dividend = \$8.50 Flotation Cost = 4.00% r p = 6.68% D P /( P p ( 1 F )) ¿ 16. Ans: A r RF = 4.10% RP M = 5.50% b = 1.10 r s = 8.300% ( r RF + b ( RP M )) 17. Ans: B D 1 = \$1.45 P 0 = \$39.00 g = 6.50% r s = 10.22% ( r RF + b ( RP M ))
18. Ans: B Weights Costs Debt 40% 6.00% Preferred 15% 7.50% Common 45% 12.00% WACC = 8.93% W ( ¿¿ d ×R d × ( 1 T ) + W p ×R p + W c ×r s ) ¿ 19. Ans: D Coupon Rate = 7.00% Periods/year = 2 Maturity (yr) = 20 Bond Price = \$825.00 Par Value = \$1,000 Tax Rate = 20% I/YR = 4.44% Time periods/yr OR Before-tax cost of debt = 8.89% After-tax cost of debt = 7.11% ( r d ( 1 – T )) Calculator inputs: N = 40 (2 x 20) PV OR Bond Price = -\$825.00 PMT = \$35 ( Coupon Rate× Par 2 ) FV OR Par OR Maturity Value = \$1,000 20. Ans: B D 1 = \$1.25 P 0 = \$50.00 g = 5.00% F = 6.00% r e = 7.66% ( D 1 /( P 0 x ( 1 F ))+ g ) ¿ 21. Ans: D V = \$456.39 (\$1,000/(1.04) 20 22. Ans: C V = \$22.09 (\$1,000/(1.10) 40 YTM = 10% [(\$1,000/\$22.09) 1/40 )] – 1)
23. Ans: A Expected Return = 20.65% [(0.22 x 0.10) + (0.26 x 0. 25) + (0.06 x 0.30) + (0.29 x 0.35)] x 100) 24. Ans: D Total Return = 28.00% P (( ¿¿ 1 P 0 + CF 1 ) × 100 ) ¿ * P 1 = \$84 Total Return = 28.00% P 1 P 0 + CF 1 * P 0 = \$70 Total Return = 28.00% P 1 P 0 + CF 1 * CF 1 = \$5.60 25. Ans: D E (R i ) = 3.74% (0.024 + 0.14 [0.12 – 0.024]) x 100 26. Ans: E WACC = 14.66% [(0.26 x 0.1)(1 - 0.2) + (0.74 x 0.17)] x 100

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