Assuming dividends grow at constant rate

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1. Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 10%, and its tax rate is 40%. Percy's CFO estimates that the company's WACC is 13.30%. What is Percy's cost of common equity? Round your answer to two decimal places.

2. A firm has a dividend yield of 9%. What is the expected return, if a firm has a 45% payout ratio, a return on equity of 10%, and assuming dividends grow at a constant rate?

3. Samuel Smith invested in gold U.S. coins ten years ago, paying $316.53 for one-ounce gold "double eagle" coins. He could sell these coins for $935.03 today. What was his annual rate of return for this investment? (PLEASE SHOW YOUR WORK).

Reference no: EM131884247

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