### Compute the cost of new common stock-retained earnings

Assignment Help Financial Management
##### Reference no: EM131192468

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of \$2.50 per share, and the current price of its common stock is \$50 per share. The expected growth rate is 8 percent.

a. Compute the cost of retained earnings (Ke). Use Formula 11-6.

b. If a \$3 flotation cost is involved, compute the cost of new common stock (Kn).

Use Formula 11-7.

#### If interest rates fall values of real options will increase

The more volatile the underlying source of risk, the more valuable the option. In general, the longer before a real option must be exercised, the more valuable it is. If inter

#### Construct a hedge and evaluate how your investment will do

Construct a hedge and evaluate how your investment will do if in six months the stock is at SF926.50, the spot exchange rate is \$0.7301, and the futures price is \$0.7295.

#### Maturity of the bonds-what is the price of the bond now

Several years ago, Castles in the Sand Inc. issued bonds at face value of \$1,000 at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the co

#### Calculate company after-tax weighted average cost of capital

During the past three years, Tysseland Communications Limited (TCL) has been constrained by the high cost of capital to fund for many of its investments. Recently, capital cos

#### Calculate number of futures contracts required for a hedge

Consider a U. S. firm with receivables of BRL 500,000 in 25 days. It hedges this position using a CME BRL futures contract maturing in 45 days. A financial analyst notes that

#### Advertising expense and consulting fees revenue

The following information was taken from the accounting records of ZZ, Inc. for the period ended December 31, 2016: Accounts payable \$13,450 Advertising expense 20,625 Consult

#### What is the estimated cost of common equity using the capm

Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4% and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an averag

#### Cash budget-basic

Grenoble Enterprises had sales of \$50,500 in March and \$60,000 in April. Forecast sales for May, June, and July are \$69,600, \$79,800, and \$99,800, respectively. The firm recei

### Write a Review 