Question

2. Summerdahl Resort's common stock is currently trading at $36.00 a share. The stock is expected to pay a dividend of $2.50 a share at the end of the year (D1 = $2.50), and the dividend is expected to grow at a constant rate of 4% a year. What is the cost of common equity? Round your answer to two decimal places.

3. Booher Book Stores has a beta of 1.1. The yield on a 3-month T-bill is 4.5% and the yield on a 10-year T-bond is 7%. The market risk premium is 4.5%, and the return on an average stock in the market last year was 11.5%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.

4. David Ortiz Motors has a target capital structure of 35% debt and 65% equity. The yield to maturity on the company's outstanding bonds is 11%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.44%. What is the company's cost of equity capital? Round your answer to two decimal places.

5. A project has an initial cost of $37,925, expected net cash inflows of $14,000 per year for 12 years, and a cost of capital of 13%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

6. A project has an initial cost of $52,125, expected net cash inflows of $12,000 per year for 8 years, and a cost of capital of 8%. What is the project's IRR? Round your answer to two decimal places.

7. A project has an initial cost of $43,650, expected net cash inflows of $8,000 per year for 12 years, and a cost of capital of 11%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1