Posted: April 24th, 2016
LL Incorporated s currently outstanding 11% coupon bonds have a yield to maturity
of 8%. LL believes it could issue at par new bonds that would provide a similar
yield to maturity. If its marginal tax rate is 35%, what is LL s after tax cost
Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend.
The stock is selling on the market for $70.00, and Burnwood must pay flotation
costs of 5% of the market price. What is the cost of the preferred stock?
Summerdahl Resorts common stock is currently trading at $36 a share. The stock
is expected to pay a dividend of $3.00 a share at the end of the year (D1 _ $3.00),
and the dividend is expected to grow at a constant rate of 5% a year. What is the
cost of common equity?
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%, but the stock
market return in the previous years was 15%. What is the estimated cost of common
equity using the CAPM?
Shi Importers balance sheet shows $300 million in debt, $50 million in preferred
stock, and $250 million in total common equity. Shi faces a 40% tax rate and the
following data: rd _ 6%, rps _ 5.8%, and rs _ 12%. If Shi has a target capital structure
of 30% debt, 5% preferred stock, and 65% common stock, what is Shi s
Spencer Supplies stock is currently selling for $60 a share. The firm is expected to
earn $5.40 per share this year and to pay a year end dividend of $3.60.
a. If investors require a 9% return, what rate of growth must be expected for
b. If Spencer reinvests earnings in projects with average returns equal to thestock s expected rate of return, what will be next year s EPS? [Hint: g _ROE(Retention ratio).]
Place an order in 3 easy steps. Takes less than 5 mins.