Stock and Points Question
Question 1 1.
Jack 's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Jack 's tax rate is 35%. What is Jack 's weighted average cost of capital?
Answer
| | 7.10% | | | 7.39% | | | 10.38% | | | 10.65% | | | 11.37% |
1 points
Question 2 1.
Peter 's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter 's Audio Shop?
Answer
| | 6.14% | | | 6.54% | | | 8.60% | | | 9.14% | | | 9.45% |
1 points
Question 3 1.
Phil 's Carvings, Inc. wants to have a weighted average cost of capital of 9%. The firm has an after-tax cost of debt of 5% and a cost of equity of 11%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?
Answer
| | .33 | | | .40 | | | .50 | | | .60 | | | .67 |
1 points
Question 4 1.
Jake 's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Jake 's paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Jake 's also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company 's tax rate is 34%. What is Jake 's
Jack 's Construction Co. has 80,000 bonds outstanding that are selling at par value. Bonds with similar characteristics are yielding 8.5%. The company also has 4 million shares of common stock outstanding. The stock has a beta of 1.1 and sells for $40 a share. The U.S. Treasury bill is yielding 4% and the market risk premium is 8%. Jack 's tax rate is 35%. What is Jack 's weighted average cost of capital?
Answer
| | 7.10% | | | 7.39% | | | 10.38% | | | 10.65% | | | 11.37% |
1 points
Question 2 1.
Peter 's Audio Shop has a cost of debt of 7%, a cost of equity of 11%, and a cost of preferred stock of 8%. The firm has 104,000 shares of common stock outstanding at a market price of $20 a share. There are 40,000 shares of preferred stock outstanding at a market price of $34 a share. The bond issue has a total face value of $500,000 and sells at 102% of face value. The tax rate is 34%. What is the weighted average cost of capital for Peter 's Audio Shop?
Answer
| | 6.14% | | | 6.54% | | | 8.60% | | | 9.14% | | | 9.45% |
1 points
Question 3 1.
Phil 's Carvings, Inc. wants to have a weighted average cost of capital of 9%. The firm has an after-tax cost of debt of 5% and a cost of equity of 11%. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?
Answer
| | .33 | | | .40 | | | .50 | | | .60 | | | .67 |
1 points
Question 4 1.
Jake 's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share. Last month, Jake 's paid an annual dividend in the amount of $1.593 per share. The dividend growth rate is 4%. Jake 's also has 6,000 bonds outstanding with a face value of $1,000 per bond. The bonds carry a 7% coupon, pay interest annually, and mature in 4.89 years. The bonds are selling at 99% of face value. The company 's tax rate is 34%. What is Jake 's