1. You work for a firm with an issue of 40,000 bonds outstanding and 5,000,000 of market value in preferred stock that sells to yield 6%. What is the value of the preferred stock if it pays a $5 dividend?
2. The common stock has a market value of $50 per share with 100,000,000 shares outstanding. If the growth rate is 6% per annum and the earnings are $ 4 per share. What is the required rate of return of the common stock?
3. Assume capital structure as above. What is the total market value of the firm if the bonds sell for $975 each?
4. Assume the capital structure as in 1 and 2 above. What is the market rate if the bonds sell for $1075 per bond?
5. Assume the capital structure as in the above. What is the weighted average cost of capital if the maturity of the bond was 5 years and the coupon rate was 6%.
6. Assume you work for a company that has issued 10000 shares of $100 par 5% preferred. The return of stock of this risk class is 6%. What is the market price of this stock based on its dividend?
7. Assume the stock from problem 6 is included here. If there were 100,000 shares of $50.00 market value common, what would the weight of the preferred stock be in the weighted average cost of capital?
8. In the above scenarios of problems 6 &7. Calculate the expected price of one share of preferred stock.