FINAN 450 Final

Expected Return = 10.84%

A stock has a beta of 1.12, the expected return on the market is 10 percent, and the risk-free rate is 3 percent. What must the expected return on this stock be?

Arithmetic Average Return = 10.17% Geometric Average Return = 9.23%

A stock has had returns of 12 percent, 19 percent, 21 percent, −12 percent, 26 percent, and −5 percent over the last six years. What are the arithmetic and geometric average returns for the stock?

Expected Return = 12.02%

Calculate the expected return.

WACC = 9.32%

Dani Corporation has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $125 million, a coupon rate of 5 percent, and sells for 91 percent of par. The second issue has a face value of $110 million, a coupon rate of 4 percent, and sells for 106 percent of par. The first issue matures in 23 years, the second in 9 years. Suppose the most recent dividend was $4.80 and the dividend growth rate is 5.1 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. The tax rate is 21 percent. What is the company's WACC?

a. 7.96% b. 6.32%

Ninecent Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 9 percent, the cost of preferred stock is 7 percent, and the pretax cost of debt is 8 percent. The relevant tax rate is 21 percent. a. What is the company's WACC? b. What is the aftertax cost of debt?

Cost of Preferred Stock = 6.16%

Savers has an issue of preferred stock with a $5.85 stated dividend that just sold for $95 per share. What is the bank's cost of preferred stock?

Cost of Equity = 10.71%

Stock in Jansen Industries has a beta of 1.1. The market risk premium is 6 percent, and T-bills are currently yielding 4.7 percent. The company's most recent dividend was $1.70 per share, and dividends are expected to grow at an annual rate of 5 percent indefinitely. If the stock sells for $34 per share, what is your best estimate of the company's cost of equity?

a. 7.65% b. 5.97%

Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually. a. What is the company's pretax cost of debt? b. If the tax rate is 22 percent, what is the aftertax cost of debt?

Total Return = 20.93%

Suppose a stock had an initial price of $54 per share, paid a dividend of $1.30 per share during the year, and had an ending share price of $64. Compute the percentage total return.

Dividend Yield = 2.19% Capital Gains Yield = 18.75%

Suppose a stock had an initial price of $64 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $76. What was the dividend yield and the capital gains yield?

Total Return = -14.45 Dividend Yield = 3.61 Capital Gains Yield = -18.06

Suppose a stock had an initial price of $72 per share, paid a dividend of $2.60 per share during the year, and had an ending share price of $59. Compute the percentage total return, dividend yield, and capital gains yield.

Average Returns: x = 7.2% y = 13% Variances: x = 0.01187 y = 0.02480 Standard Deviations: x = 10.89% y = 15.75%

Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y.

Stock A = .7196 Stock B = .2804

What are the portfolio weights for a portfolio that has 154 shares of Stock A that sell for $50 per share and 120 shares of Stock B that sell for $25 per share?

Portfolio Expected Return = 12.69%

You own a portfolio that has $3,500 invested in Stock A and $4,500 invested in Stock B. If the expected returns on these stocks are 11 percent and 14 percent, respectively, what is the expected return on the portfolio?

Portfolio beta = 1.11%

You own a stock portfolio invested 35 percent in Stock Q, 25 percent in Stock R, 25 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are .83, 1.21, 1.22, and 1.39, respectively. What is the portfolio beta?