BFM Problems to do
Midterm 1 then the new stuff
Review midterm 2 stuff tonight
check back on new stuff once more tonight and call it a night
premium A/beta A = premium B/beta B
dividend growth model (changing growth rates)
Capital Structure TEST Questions and Solutions
1. Moon Beam Industries has a debt-equity ratio of 1.5. Its WACC is 12 percent, and
its cost of debt is 12 percent. The corporate tax rate is 35 percent.
a. What is Moon Beam's cost of equity capital?
Suggested Test Questions: Bonds
What is the price of a 20 year, zero coupon bond with a 5% yield to maturity and a $1000
face value? What would be the price of this bond if it paid out coupons semiannually, with
a 4.8% coupon rate?
Test Questions: Capital Budgeting
Below are the cash flows for two mutually exclusive projects.
Calculate the payback period for each project.
Which project would you
Capital Market History
The dividend yield is the dividend divided by price at the beginning of the period, so:
Dividend yield = $2 / $25 = .08, = 8%
And the capital gains yield is the increase in price divided by the initial price, so: