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Find needed answers here - http://entire-courses.com/FIN-515-Week-6-Homework |
This work of FIN 515 Week 6 Homework shows the solutions to the following problems: Prob 12-1 Prob 13-2 Prob 13-3 Prob 13-4 |
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Find needed answers here - http://entire-courses.com/FIN-515-Week-6-Homework |
Business - General Business 1. (TCO D) A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price? (Points : 10) $16.28 $16.70 $17.13 $17.57 $18.01 2. (TCO D) If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock’s expected total return for the coming year? (Points : 10) 7.54% 7.73% 7.93% 8.13% 8.34% 3. (TCO D) Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? (Points : 10) $104.27 $106.95 $109.69 $112.50 $115.38 4. (TCO E) Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? (Points : 10) Long-term debt Accounts payable Retained earnings Common stock Preferred stock 5. (TCO E) Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A’s cost of capital is 10.0%, Division B’s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A’s projects are equally risky, as are all of Division B's projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? (Points : 10) A Division B project with a 13% return. A Division B project with a 12% return. A Division A project with an 11% return. A Division A project with a 9% return. A Division B project with an 11% return. 6. (TCO D) Butcher Timber Company hired your consulting firm to help them estimate the cost of common equity. The yield on the firm's bonds is 8.75%, and your firm's economists believe that the cost of common can be estimated using a risk premium of 3.85% over a firm's own cost of debt. What is an estimate of the firm's cost of common from retained earnings? (Points : 10) 12.60% 13.10% 13.63% 14.17% 14.74% 7. (TCO F) Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. WACC: 10.00% Year 0 1 2 3 ----------------------------------------------- Cash flows -$1,050 $450 $460 $470 (Points : 10) $ 92.37 $ 96.99 $101.84 $106.93 $112.28 8. (TCO F) Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 --------------------------------------------------------- Cash flows -$850 $300 $290 $280 $270 (Points : 10) 13.13% 14.44% 15.89% 17.48% 19.22% 9. (TCO F) Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? WACC: 10.00% Year 0 1 2 3 4 --------------------------------------------------------- Cash flows -$950 $525 $485 $445 $405 (Points : 10) 1.61 years 1.79 years 1.99 years 2.22 years 2.44 years 10. (TCO H) Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a three-year tax life, would be depreciated by the straight-line method over its three-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s three-year life. What is the project’s NPV? Risk-adjusted WACC Net investment cost (depreciable basis) Straight-line deprec. rate Sales revenues, each year Operating costs (excl. deprec.), each year Tax rate 10.0% $65,000 33.333% $65,500 $25,000 35.0% a. $15,740 b. $16,569 c. $17,441 d. $18,359 e. $19,325 Indicate your choice for your answer - a,b,c,d,e first and then show your work/explain your answer so as to earn partial credit in the event you selected the incorrect answer. |
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Find needed answers here - http://entire-courses.com/FIN-515-Week-6-Homework |
When studying for exams, make sure you're getting enough sleep. Getting a full night's sleep and staying on a sleeping schedule can help you much more than skipping or cutting back on your sleep. By getting plenty of rest, you'll be more alert, have more energy, and be able to learn your material much easier. |
