Chapter 7, problems 7-1, 7-2, and 7-4. (7-1) Thress Industries just paid a dividend of $1.50 a share (i.e., D 0 = $1.50). The dividend is expected to grow 5% a year for the next 3 years and then 10% a year thereafter. What is the expected dividend per share for each of the next 5 years? (7-2) Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, r s , is 13%. What is the estimated value per share of Boehm’s stock? (7-4) Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stock’s required rate of return (assume the market is in equilibrium with the required return equal to the expected return)? Chapter 9, problems 9-1 (a, b, c), 9-3, and 9-6. (9-1) Calculate the after-tax cost of debt under each of the following conditions: a. rd of 13%, tax rate of 0% b. rd of 13%, tax rate of 20% c. rd of 13%, tax rate of 35% (9-3) Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the company’s cost of preferred stock, rps?

Week 3 Chapter Assignments

Download DOCX Report

Upload
shaopuyu
View
42
Download
5

Embed Size (px)

DESCRIPTION

Assignment

Citation preview

Chapter 7, problems 7-1, 7-2, and 7-4.

(7-1) Thress Industries just paid a dividend of $1.50 a share (i.e., D0 = $1.50). The dividend is expected to grow 5% a year for the next 3 years and then 10% a year thereafter. What is the expected dividend per share for each of the next 5 years?

(7-2) Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, rs, is 13%. What is the estimated value per share of Boehms stock?

(7-4) Nicks Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $50 a share. What is the stocks required rate of return (assume the market is in equilibrium with the required return equal to the expected return)?

Chapter 9, problems 9-1 (a, b, c), 9-3, and 9-6.

(9-1) Calculate the after-tax cost of debt under each of the following conditions:a. rd of 13%, tax rate of 0%b. rd of 13%, tax rate of 20%c. rd of 13%, tax rate of 35%(9-3) Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the companys cost of preferred stock, rps?(9-6) Booher Book Stores has a beta of 0.8. The yield on a 3-month T-bill is 4%, and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM?