1.The market risk premium is 7%, and the risk-free rate of return is 4%. The common stock of Northern Realty Shares has...
1.The market risk premium is 7%, and the risk-free rate of return is 4%. The common stock of Northern Realty Shares has a beta coefficient of 1.5. Based on this information, what is the firm's cost of equity capital? 2.New Wave Tunes Inc., a company that operates syndicated radio stations in the North Eastern USA, issues debt with a maturity of 15 years. In the case of bankruptcy, holders of this debt will have claim to the intellectual property of New Wave Tunes, Inc.. Which of the following best describes this type of corporate debt? a. a debenture b. a mortgage bound c.an asset-blacked bound d. a note 3. XTerra Adventures Enterprises plans to raise new financial capital by issuing a $100 par, 4%, convertible preferred stock. If a similar preferred stock is currently trading at $30 per share, what is the firm's estimated cost of preferred stock capital? a. 16.2% b. 14.5% c. 15.5% d. 13.3% 4. HTL Hospitality Services' outstanding debt has a yield to maturity of 7%. The firm's tax rate is 30%. What is HTL's effective cost of debt ? a. 7% b. 5.2% c.6.3% d. 4.9%
Homework Answers
1
| As per CAPM |
| expected return = risk-free rate + beta * (Market risk premium) |
| Expected return% = 4 + 1.5 * (7) |
| Expected return% = 14.5 |
2
Please ask remaining parts separately, questions are unrelated. I have done one bonus
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1.The market risk premium is 7%, and the risk-free rate of return is 4%. The common stock of Northern Realty Shares has...
3. XTerra Adventures Enterprises plans to raise new financial capital by issuing a $100 par, 4%,...
3. XTerra Adventures Enterprises plans to raise new financial capital by issuing a $100 par, 4%, convertible preferred stock. If a similar preferred stock is currently trading at $30 per share, what is the firm's estimated cost of preferred stock capital? a. 16.2% b. 14.5% c. 15.5% d. 13.3% 4. HTL Hospitality Services' outstanding debt has a yield to maturity of 7%. The firm's tax rate is 30%. What is HTL's effective cost of debt ? a. 7% b. 5.2%...
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that is the one question,
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