BUSN 379 Week 6 Homework
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3. Calculating
Cost of Equity. Stock in CDB
Industries has a beta of .90. The market risk premium is 7 percent, and T-bills
are currently yielding 3.5 percent. CDB’s most recent dividend was $1.80 per share, and dividends are
expected to grow at a 5 percent annual
rate indefinitely. If the stock sells for $47 per share, what is your best estimate of CDB’s cost of equity?
5. Calculating
Cost of Preferred Stock. Sixth Fourth
Bank has an issue of preferred stock with a $6.25 stated dividend that just
sold for $108 per share. What is the bank’s cost of preferred stock?
6. Calculating
Cost of Debt. ICU Window, Inc., is trying to determine its cost of debt.
The firm has a debt issue outstanding with seven
years to maturity that is quoted at 108
percent of face value. The issue makes semiannual payments and has an
embedded cost of 6.1 percent annually. What is ICU’s pretax cost of debt? If
the tax rate is 38 percent, what is the after-tax cost of debt?
15. Finding
the WACC. Given the following information for Janicek Power Co., find the
WACC. Assume the company’s tax rate is 35 percent.
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