1. SuWan Industries has a debt-equity ratio of 1.5. Its WACC (weighted average cost of capital) is 8 percent, and its cost of dbet is 5.6 percent. The corporate tax rate is 35 percent. Calculate SuWan's cost of equity capital.
A. 11.60 percent
B. 13.74 percent
C. 14.54 percent
D. 12.44 percent
2. RTF stock is currently priced at $37.13 a share. The only options on this stock are the March $45 call option, which is priced at $1.72, and the March $45 put which is priced at $7.99. Flo would like the option to purchase 300 shares of RTF should the price suddenly rise as she expects. Her main concern is that the price will double after hours and she will miss out on some potential profits. She also realizes the stock is highly risky and she could lose her entire investment, which she prefers not to do. What should she do to help offset her concerns?
A. Buy 3 call option contracts at a cost of $516
B. Sell 3 call option contracts and receive $516
C. Buy 300 call option contracts at a cost of $5.16
D. Buy 3 put option contracts at a cost of $23.97
3. QZinc Furniture has 77,000 shares of stock outstanding with a par value of $0.50 per share. The current market value of the firm is $8,280,000. The balance sheet shows a balance of $1,142,000 in the capital in excess of par value account and retained earnings of $2,234,000. The company just announced a 7-for-2 stock split. What will be the market price per share after the split?
A. $43.89
B. $107.53
C. $30.72
D. $376.36