QuestionQuestion

1. ABC just issued a dividend of $3.40 on its common stock. The company is supposed to maintain a constant 4.5% growth rate in its dividend indefinitely. If the stock sells for $53 a share, what is the cost of equity?                                                                                                                        
2. Cooper, Inc. has a beta of 1.15. If the risk free rate is 3.5% and the expected return to market is 11%, what is the company’s cost of equity?                                                                              
3. Penny Blossoms has a target capital structure of 70% debt and 30% equity. Its cost of equity is 11%, cost of debt is 7%, and its tax rate is 35%.
a. What is Penny Blossom’s WACC?                                                                                 
b. What would happen to the WACC if it changed its capital structure to 50%/50% (no math just theory, explain your answer)?                                                                     
4. Use the table below to calculate the payback of the project and the NPV of the project. For NPV use both a 10% and then a 20% WACC. Briefly explain whether you would take the project or not at each of the WACCs and if you would accept the project based on a payback requirement of 2 years.
                                                                                                                                    
Calculate NPV, Year, Cash Flow
0 -$32,000
1 $13,200
2 $18,500
3 $10,600
10% Required Return
20% Required Return

Solution PreviewSolution Preview

This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.

Finance Problems
    $23.00 for this solution

    PayPal, G Pay, ApplePay, Amazon Pay, and all major credit cards accepted.

    Find A Tutor

    View available Finance Tutors

    Get College Homework Help.

    Are you sure you don't want to upload any files?

    Fast tutor response requires as much info as possible.

    Decision:
    Upload a file
    Continue without uploading

    SUBMIT YOUR HOMEWORK
    We couldn't find that subject.
    Please select the best match from the list below.

    We'll send you an email right away. If it's not in your inbox, check your spam folder.

    • 1
    • 2
    • 3
    Live Chats