A firm's pre-tax cost of debt is 10%. If the firm is of average risk, what...
A firm's pre-tax cost of debt is 10%. If the firm is of average risk, what is the cost of equity using the bond yield plus premium approach?
| a. |
11% |
|
| b. |
15% |
|
| c. |
13% |
|
| d. |
10% |
|
| e. |
14% |
Homework Answers
Cost of equity using bond yield plus risk premium=pre-tax cost of debt+risk premium=pre-tax cost of debt+4%=10%+4%=14%
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A firm's pre-tax cost of debt is 10%. If the firm is of average risk, what...
10. Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the...
10.
Barton Industries estimates its cost of common equity by using
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approach, and the DCF model. Barton expects next year's annual
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grow at a constant rate gL = 5.7%. The firm's current
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rate, rRF, = 4.7%; the market risk premium,
RPM, = 6%, and the firm's stock has a current beta, b, =
1. Assume...
Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium...
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Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium...
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5. Advertising firm Harry Davis Industries has asked you to estimate its weighted average cost of...
5. Advertising firm Harry Davis Industries has asked you to estimate its weighted average cost of capital. To that end, they have provided you with the following information: Tax rate is 40% Harry Davis can issue bonds with a 12% semiannual coupon, a $1000 par value, and a 15 year maturity, at a price of $1153.72 net of floatation costs. The firm has no preferred stock. The firm's common stock is currently selling at a price of $50 per share....
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual |dividend, D1, to be $1.50 and it expects dividends to grow at a constant rate g = 4.8%. The firm's current common stock price, Po, is $25.00. The current risk-free rate, rRF, = 4.2%; the market risk premium, RPM, = 5.8%, and the firm's stock has a current beta, b, 1.10. Assume...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.70 and it expects dividends to grow at a constant rate g = 3.5%. The firm's current common stock price, P0, is $22.00. The current risk-free rate, rRF, = 4.6%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, = 1.3....
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
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Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $2.10 and it expects dividends to grow at a constant rate g = 5.0%. The firm's current common stock price, P0, is $20.00. The current risk-free rate, rRF, = 4.2%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, = 1.30....
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.90 and it expects dividends to grow at a constant rate g = 3.6%. The firm's current common stock price, P0, is $25.00. The current risk-free rate, rRF, = 4.9%; the market risk premium, RPM, = 6.5%, and the firm's stock has a current beta, b, = 1.35....
10.
Barton Industries estimates its cost of common equity by using
three approaches: the CAPM, the bond-yield-plus-risk-premium
approach, and the DCF model. Barton expects next year's annual
dividend, D1, to be $2.40 and it expects dividends to
grow at a constant rate gL = 5.7%. The firm's current
common stock price, P0, is $23.00. The current risk-free
rate, rRF, = 4.7%; the market risk premium,
RPM, = 6%, and the firm's stock has a current beta, b, =
1. Assume...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk premium approach, and the DCF model. Barton expects next year's annual dividend, Di, to be $2.10 and it expects dividends to grow at a constant rate 9L - 5.8%. The firm's current common stock price, Po, is $29.00. The current risk-free rate, RF, - 4.3%; the market risk premium, RPM, - 5.6%, and the firm's stock has a current beta, b, -...
5. Advertising firm Harry Davis Industries has asked you to estimate its weighted average cost of capital. To that end, they have provided you with the following information: Tax rate is 40% Harry Davis can issue bonds with a 12% semiannual coupon, a $1000 par value, and a 15 year maturity, at a price of $1153.72 net of floatation costs. The firm has no preferred stock. The firm's common stock is currently selling at a price of $50 per share....
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual |dividend, D1, to be $1.50 and it expects dividends to grow at a constant rate g = 4.8%. The firm's current common stock price, Po, is $25.00. The current risk-free rate, rRF, = 4.2%; the market risk premium, RPM, = 5.8%, and the firm's stock has a current beta, b, 1.10. Assume...
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