User Account

All Pages

Compute what was your total return for last year

Assignment Help Finance Basics
Reference no: EM131406270

Assignment

Purpose of Assignment

The purpose of this assignment is to allow the student an opportunity to calculate the rate of return of equity and debt instruments. It allows the student to understand the effects of dividends; capital gains; inflation rates; and how the nominal rate of return affects valuation and pricing. The assignment also allows the student to apply concepts related to CAPM, WACC, and Flotation Costs to understand the influence of debt and equity on the company's capital structure.

Assignment Steps

Resources: Corporate Finance

Calculate the following problems and provide an overall summary of how companies make financial decisions in no more than 700 words, based on your answers:

1. Stock Valuation: A stock has an initial price of $100 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $125. Compute the percentage total return, capital gains yield, and dividend yield.

2. Total Return: You bought a share of 4% preferred stock for $100 last year. The market price for your stock is now $120. What was your total return for last year?

3. CAPM: A stock has a beta of 1.20, the expected market rate of return is 12%, and a risk-free rate of 5 percent. What is the expected rate of return of the stock?

4. WACC: The Corporation has a targeted capital structure of 80% common stock and 20% debt. The cost of equity is 12% and the cost of debt is 7%. The tax rate is 30%. What is the company's weighted average cost of capital (WACC)?

5. Flotation Costs: Medina Corp. has a debt-equity ratio of .75. The company is considering a new plant that will cost $125 million to build. When the company issues new equity, it incurs a flotation cost of 10%. The flotation cost on new debt is 4%. What is the initial cost of the plant if the company raises all equity externally?

Reference no: EM131406270

Questions Cloud

Is that still a viable risk management approach for consumer : In your opinion and expertise, is that still a viable risk management approach for consumers today? Class, what's your opinion here?
Comprehensive application of everything : The Final Report is a comprehensive application of everything that has been covered in the course. Your assignment is to prepare a formal business report according to the requirements described below.
Develop a brand name as a source of competitive advantage : Do ethical practices affect a firm's ability to develop a brand name as a source of competitive advantage? If so, how does this happen?
International horizontal growth entry strategies : Discussion: International Horizontal Growth Entry Strategies Describe which of the international horizontal growth entry strategies works best for your Strategic Audit firm(FedEx) and explain why.
Compute what was your total return for last year : Total Return: You bought a share of 4% preferred stock for $100 last year. The market price for your stock is now $120. What was your total return for last year?
Non-financial performance measures and financial metrics : It is a performance measurement framework that includes both strategic non-financial performance measures and financial metrics, and gives managers and executives a more 'balanced' view of organizational performance.
What will the new process look like : Line managers are currently handling the recruiting and staffing functions. Each manager tends to follow different hiring practices. Some of the managers are reluctant to hand over the hiring of their staff to the HR department. Other managers fee..
Calculate the range of allowable currents : Calculate the range of allowable currents in Problem 31.43 if the temperature should be between 0.7 and 0.8 times the melting temperature of copper. Repeat this problem for carbon steel.
Propose at least two strategies to avoid assumptions : Propose at least two strategies to avoid assumptions in a multiyear plan. Justify your response. Recommend at least two best practices for analyzing multiyear financial statements. Justify your response.

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine if an arbitrage opportunity was available

Determine if an arbitrage opportunity was available, and explain what transactions were executed.

  How low would the interest rate on the loan

If the interest rate on the $200,000 loan is 12 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

  Consulting income at kate walsh associates for the period

consulting income at kate walsh associates for the period february-july has been as followsmonth income 1000sfebruary

  Slattery ability to achieve level of growth

What do your projections imply for Slattery's owners/managers? How would you evaluate Slattery's ability to achieve this level of growth (as measured by the increase in fixed assets)?

  What does the upper control limit

What does the upper control limit of either a p, np, c, or u chart tell us about the process? What does the lower control limit tell us?

  Estimate the average annual inflation rate

A new Grady White fishing boat cost $5000 in 1979. Today, the very same boat costs around $40,000. Estimate the average annual inflation rate, using the Rule of 72.

  Discuss the main drivers for commercial property development

DEVELOPMENT FINANCE AND FUNDING Coursework in lieu of NEW YORK TRIP JANUARY 2013. "Discuss the main drivers for commercial property development in the central London area over the last 6 years. Have BIDS been a significant factor for good in this a..

  Compute your rate of return if you sell the bond next year

A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for $871.65. Compute your rate of return if you sell the bond next year for $880.10.

  Describe the hyper-social organization

Describe the hyper-social organization. Explain the four pillars of a hyper-social organization.

  What type of option is an insurance policy

An insurance policy is considered analogous to an option. From a policyholder's perspective, what type of option is an insurance policy? Why?

  Using the company research in motion llc the makers of

using the company research in motion llc the makers of blackberry identify examples of how concepts and issues in

  Ending amount is due to compound interest

If you invest $1,000 in year 1 and leave it alone for 50 years and earn 15% per year, then:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd