Reference no: EM131434739
1. Whitewater's stock is trading at $37.00 per share. The stock is expected to have a year-end dividend of $2.20 per share (D1), which is expected to grow at some constant rate g throughout time. The stock's required rate of return is 12 percent. If you are an analyst who believes in efficient markets, what is your forecast of g? Answer in a percentage without the % sign, and round it to two decimal places, i.e., 10.54 for 10.54% (or 0.1054).
2. Calculate the after-tax cost of debt if an interest rate is 5 percent and the tax rate is 34 percent. Express your answer in percentage (without the % sign) and round it to two decimal places.
true or false
1. The WACC represents the cost of capital based on historical averages. In that sense, it does not represent the marginal cost of capital.
2. When calculating the cost of capital, the cost of retained earnings should be zero as the company already earned it in previous periods.
3. If a company uses CAPM to compute the cost of equity, a reduction in the market risk premium reduces a company's WACC.
4. Typically the after-tax cost of debt financing exceeds the after-tax cost of equity financing.
5. All else equal, an increase in a company's stock price will increase the marginal cost of common stock, rs.
6. The cost of capital should reflect the weighted average cost of the various sources of long-term funds a firm uses to support its assets.
7. Is the amount of cash flow available for distribution to all investors after all necessary investments in operating capital have been made.
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