1) Union Local School District has bonds outstanding with a coupon rate of 3.3 percent paid semiannually and 16 years to maturity. The yield to maturity on these bonds is 3.6 percent and the bonds have a par value of $10,000.
What is the dollar price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
2) Watters Umbrella Corp. issued 15-year bonds 2 years ago at a coupon rate of 8.2 percent. The bonds make semiannual payments. If these bonds currently sell for 85 percent of par value, what is the YTM?(Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
3) Grand Adventure Properties offers a 7 percent coupon bond with annual payments. The yield to maturity is 5.85 percent and the maturity date is 7 years from today. What is the market price of this bond if the face value is $1,000?
$951.07
$710.54
$1,074.16
$1,064.54
$1,015.61
4) The Starr Co. just paid a dividend of $1.90 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Investors require a return of 10 percent on the stock.
What is the current price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Current price $
What will the price be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Stock price $
What will the price be in 5 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Stock price $
5) Ayden, Inc., has an issue of preferred stock outstanding that pays a dividend of $5.95 every year, in perpetuity. This issue currently sells for $94 per share.
What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return %
6) The next dividend payment by ECY, Inc., will be $1.80 per share. The dividends are anticipated to maintain a growth rate of 5 percent, forever. The stock currently sells for $35 per share.
What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return %
7) Zoom stock has a beta of 1.46. The risk-free rate of return is 3.07 percent and the market rate of return is 11.81 percent. What is the amount of the risk premium on Zoom stock?
10.25%
17.24%
8.09%
9.59%
12.76%
8) The risk premium for an individual security is computed by: multiplying the security's beta by the risk-free rate of return. dividing the market risk premium by the beta of the security.
dividing the market risk premium by the quantity (1 + Beta). adding the risk-free rate to the security's expected return. multiplying the security's beta by the market risk premium.
The risk-free rate of return is 3.68 percent and the market risk premium is 7.84 percent. What is the expected rate of return on a stock with a beta of 1.32?
9.24%
14.03%
14.36%
13.12%
9.17%
9) Mullineaux Corporation has a target capital structure of 80 percent common stock and 20 percent debt. Its cost of equity is 12 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent.
What is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC %
11) Miller Manufacturing has a target debt-equity ratio of .55. Its cost of equity is 14 percent, and its cost of debt is 9 percent. If the tax rate is 40 percent, what is the company's WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC %
12) Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $77, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value $60 million, a coupon of 6 percent, and sells for 97 percent of par. The second issue has a face value of $30 million, a coupon of 7 percent, and sells for 105 percent of par. The first issue matures in 21 years, the second in 4 years.
a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Equity / Value
Debt / Value
________________________________________
b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Equity / Value
Debt / Value
________________________________________
c. Which are more relevant?
Market value weights
Book value weights
13) Titan Mining Corporation has 8.3 million shares of common stock outstanding and 270,000 5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $31 per share and has a beta of 1.15, and the bonds have 15 years to maturity and sell for 112 percent of par. The market risk premium is 7.1 percent, T-bills are yielding 4 percent, and the company's tax rate is 30 percent.
a. What is the firm's market value capital structure? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
Weight
Debt
Equity
__________________________________
b. If the company is evaluating a new investment project that has the same risk as the firm's typical project, what rate should the firm use to discount the project's cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Discount rate %