Reference no: EM131863234

1. A General Co. bond has a 7 percent coupon and pays interest semi-annually. The face value is $1,000 and the bond is selling at 102.05% of par. The bond matures in 15 years. The corporation’s tax rate is 34%. What is the company’s after-tax cost of debt?

2. The common stock of Eddie's Engines, Inc. sells for $25.71 a share. The stock is expected to pay $1.65 per share. Eddie's has established a pattern of increasing their dividends by 6 percent annually and expects to continue doing so. What is the market rate of return on this stock?

3. The risk-free rate of return is 4 percent and the market risk premium is 7 percent. What is the expected rate of return on a stock with a beta of 0.92?

4. The preferred stock of North Cost Shoreline pays an annual dividend of $1.70 and sells for $15.75 a share. What is the rate of return on this security?

5. Based on the dividend growth model, what are the two components of the total return on a share of stock?

6. The Auto Group has 1,000 bonds outstanding that are selling for $980 each. There are also 7,000 shares of preferred stock at a market price of $40 each. The common stock is priced at $30 a share and there are 35,000 shares outstanding. What is the weight of the common stock as it relates to the firm's weighted average cost of capital?

7. Jack's Construction has 75,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5 percent. The company also has 3 million shares of common stock outstanding. The stock has a beta of 1.2 and sells for $40 a share. The U.S. Treasury bill is yielding 4 percent and the market risk premium is 8 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?