Fin515 Week 4 Essay

595 words - 3 pages

Homework Assignment: Week 4
(7–2) 
Constant Growth Valuation
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 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock?

P=d1(R-G) = 1.5/(8% [15-7]). The value is 18.75.

(7–4) 
Preferred Stock Valuation
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?

r=5/50. The required rate of return should be 10 percent.
(7–5) 
...view middle of the document...

5+(11.5-7.5)*1.2=12.3... D0 = 2, D1 = 2.4, D2
= 2.88, and D3 = 3.08. PV for the dividends= 4.42. P2= 46.10. Stock price= 50.50
(9-2)
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 of debt?
 
rd(1 - T) = 0.08(0.65) = 5.2%.

(9-4)
Burnwood Tech plans to issue some $60 par preferred stock with a 6% dividend. A similar stock is selling on the market for $70. Burnwood must pay flotation costs of 5% of the issue price. What is the cost of the preferred stock?
Rps = 60(.06) / 70(1-.05) = 3.60 / 66.50 = 5.441%
(9-5)
Summerdahl Resort’s 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 its cost of common equity?
 Rs = (3 /36) + .05 = 13.33%

(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?
Rs = .06 + .8(.055) = 10.4% 
(9-7)

Shi Importer’s balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi’s tax rate is 40%, 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 its WACC?
WACC = .30(.06) (1 - .40) + .05(.58) + .65(.12) = 9.17%

 

Other Essays Like Fin515 Week 4

The French And Indian War: The "Real" First World War

1955 words - 8 pages The Seven Years War, or more commonly referred to as “The French and Indian War”, has been called the true First World War. In this book The French and Indian War: Deciding the Fate of North America, the author and historian Walter R. Borneman paints a detailed and elaborate picture that justifies the claim of it being the first true war of global proportions. If ever there truly was a climax to the never ending feud of the European powers

Is The Use Of Animals In Medical Research A Necessary Measure?

1513 words - 7 pages . L., Gowans. "Alternatives To Animal Experiments In Medical Research." The British Medical Journal 1.5907 (n.d.): JSTOR SRU gateway. Web. 6 Dec. 2011. Thomassen, Marte et al. “Animal Testing In Medical Research: Past, Present and Future”. nt.ntnu.no. Norges Teknisk-Naturvitenskapelige Universitet. 2-4. Web. 28 November 2011. "Types of Animal Testing." AAVS.org. American Anti-Vivisection Society, 2011. Web. 6 Dec. 2011. United States. United

Education And The Evolving Job Market

2363 words - 10 pages teachers to figure out what it is that their students already know and what must still be learned (Gregory, et. al., 2007). Pre-assessing students for readiness, interest, and/or preference is key to ensuring that teachers do not continue to treat all students in the same way (Burgrraf, 2004). This step should be done at least a week before the upcoming unit in order to give a teacher enough time to effectively plan instruction and complete

Young And Relentless

1737 words - 7 pages There are numerous influences that can be responsible of teenager’s behaviors and attitude as they develop. One factor that is important to these behaviors is parental figures being over involved or uninvolved in their children’s lives. Many of these effects include illegal substance abuse, rising sexual activity, underage alcohol consumption, and tobacco use. Studies show parental participation plays a key role in the characteristics developed

The Natural Law Theory

1231 words - 5 pages Obeying by the natural law theory is the only true and moral way to live life; especially a life lived in God’s image. God’s presence is a guiding factor to obtaining a moral and virtuous life, which can only be obtained by following the natural law theory. God created a set of laws as a supreme guide for humans to live life, like any law these laws were created to ensure wellbeing for everyone. The laws he created are the civil law, the natural

Resolved: Presidential Signing Statements Threaten To Undermine The Rule Of Law And The Separation Of Powers

1811 words - 8 pages statements: Constitutional and institutional implications (Order Code RL33667)Congressional Research Service. Kelley, C. S. (2007). The law: Contextualizing the signing statement. Presidential Studies Quarterly,, 37(4), 737-748. Retrieved from http://www.jstor.org/stable/27552286 Kinkopf, N. (2006). Signing statements and the president's authority to refuse to enforce the law. American Constitution Society for Law and Policy Lee, M. (2008

Oppressive Systems Of Government In Egypt And Animal Farm

1529 words - 7 pages As in Egypt, Orwell demonstrates through his allegorical novel “Animal Farm” that leaders are able to establish and maintain power over a people, and in turn create an oppressive and corrupt government system. Orwell shows the significant difference in the education and levels of knowledge in the animals, and how the government takes advantage of this difference. The split between the levels of intelligence is portrayed in the first chapter when

The Pathway To Psychosis

1415 words - 6 pages “How all occasions do inform against me” is a line from act IIII, scene IIII of William Shakespeare’s Hamlet. This line, spoken by Hamlet, expresses his emotional state as he is currently overwhelmed by the death of his father, the king of Denmark, and the situation surrounding it. After Hamlet learns of his father’s death he finds out that his mother has married Claudius, Hamlet’s uncle. On top of all of that, Hamlet soon after

Rated “M” For “More Censorship Not Needed”

1241 words - 5 pages Since the moment video games became a commercial success there have been people who have pushed for unfair amounts of censorship to be placed upon the content of the games and its availability to children. These groups push for increased regulations on content but there is already an appointed group to handle this issue, the ESRB. Even though there has been an increase in mature content in the video game industry, increased censorship is not

Four Components Of A Legally Astute Social Media Marketing Manager

1914 words - 8 pages With the advances in technology constantly changing companies have to find better ways to market their products to consumers. The explosion of Facebook has given companies a way to market products to consumers. Examine how a legally astute manager can use social media to his advantage. Review different forms of dispute resolution and determine which one works the best. What is the best course of action, the government can use to

Obama's Values

1217 words - 5 pages As individuals, we don’t tend to take action unless it’s for self-interest; however, in Dreams from My Father, Obama spends three years, after college, as a community organizer in Chicago. Obama goes through tribulations, disappointments, and even complete failures organizing meaningful events, decisive meetings, and humble gatherings but he keeps working toward achieving any possible change in the community. Even though results give him every

Related Papers

The Separation Of Capital Ownership And Control

1577 words - 7 pages The argument of whether the separation of capital ownership and control is an efficient form of organization has constantly been a controversial issue. The criticism whether the controllers’ act is in the best interest of the owners’ wills never end as long as hired managers operate management. As the number of public companies has been increasing over the course of this century, meanwhile the American style of contact based corporation has

The Versatility And Flexibility Of Oled's

1014 words - 5 pages In April 1, 2002, organic light emitting diodes gain rise in the scientific community with their published, more practical form at Ames Laboratory. “Scientists at the U.S. Department of Energy's Ames Laboratory, in collaboration with scientists at the University of Michigan, Ann Arbor, have developed and demonstrated a novel, fluorescence-based chemical sensor that is more compact, versatile and less expensive than existing technology of its

Comparing The Moral Virtues Of Antony And Julian The Apostate

1103 words - 5 pages Roman emperor Julian the Apostate and Christian leader Antony both exhibited many qualities of character during their existence. Both of them led very distinctive lives although shared several ethical values. Book 25 of “The Later Roman Empire” and the book “Early Christian Lives” show concrete evidence of this. In the following essay, I will argue how both leaders’ lives were devoted to their religious beliefs and their mutual cardinal virtues

Living In A Cashless Society Essay

1637 words - 7 pages Cash. “The Cashless Society.” October 18, 2009. . Avusanjin1. (2009, June 27). OPPAPERS.COM. “Cashless Society.”, pp. 1-4. October 19, 2009. . Business Defintion for: Cashless Society. (2009, October 6). Retrieved October 17, 2009, from BNET Business Dictionary: . CreditorWeb. (2009, October 11). Going Cashless. Retrieved October 21, 2009, from CreditorWeb: Credit Cards made easy: .