Problem 1: A share of a venture's preferred stock is convertible into 1.5 shares of its common stock. The dividend on the preferred stock is $.50 per share. If the firm's common stock is currently trading at $9.75, what is the conversion value of a share of the preferred stock? What would be the dividend yield on the preferred stock based on its conversion value?
Problem 2 Calculate the weighted average cost of capital (WACC) based on the following information : the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%
Problem 3 Estimate a venture's terminal value based on the following information: current year's net income = $20,000; next year's expected cash flow = $26,000;constant future growth rate = 7%; and venture investors' required rate of return = 20%