The cost of equity capital for the Houck Corporation is 18%. If the stock offers a dividend yield of 7%, what is the implied expected growth rate? The cost of equity capital for the Houck Corporation is 18%. If the stock offers a dividend yield of 7%, what is the implied expected growth rate?
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- You want to calculate the weighted average cost of capital. The dividend just paid is $2.50/share. It is anticipated to grow at a rate of 5% for the foreseeable future. What is the cost of equity if the current price of stock is $44.30 a share? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) Cost of equity %Use the information below to calculate Weighted Average Cost of Capital, assuming that no new shares will need to be sold and a capital structure that is 50% debt and 50% equity. coupon rate on bonds 13.00% corporate tax rate 25.00% anticipated dividend $5.00 yield to maturity on bonds 11.00% current share price $100.00 floatation costs 5.00% expected growth rate 7.00% a. 10.13% b. 10.26% c. 12.13% d. 11.88%If the company's dividends growth rate is 2%, what would be the optimal capital structure for ABC Co.? ABC Co. has the following projected results for next year's operation depending on the chosen capital structure. Debt Dividends Cost of Ratio Per Share Equity 0% P5.50 11.5 % 25% 6.00 12.0 % 40% 6.50 13.0 % 50% 7.00 14.0 % 75% 7.50 15.0 % A. 0% debt; 100% equity B. 25% debt; 75% equity C. 40% debt; 60% equity D. 50% debt; 50% equity E. 75% debt; 25% equity
- Please show the solution. Thank you. 1. Company X is interested in calculating its weighted-average cost of capital. Company X has a current financial structure that is composed of 50% debt, 40% ordinary shares, and 10% preference shares. Ignore the effects of cost of retained earnings. The beta of Company X shares is 0.7, and the current risk-free rate of return is 4%. The market risk premium is 6%. The dividend on Company X preference shares is set at P2.25, and the net issuance price per share (which happens to be the same as the current price per share) of preference shares is P30. Debt issued by Company C yields an 11% stated interest rate to investors. The marginal tax rate for Company X is 40%. What is the weighted-average cost of capital for Company X?The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The current risk-free rate of return (rRFrRF) is 3.86% while the market risk premium is 6.17%. The Burris Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach The Taylor Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost of internal equity. Taylor's bonds yield 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 4.95%. Based on the bond-yield-plus-risk-premium approach, Taylor's cost of internal equity is: 16.47% 19.76% 18.12% 15.65% The cost of eguity usina the discOunted.cash flow for dividend.aroutb) approachEstimating Cost of Equity Capital Assume that a company’s market beta equals 0.8, the risk-free rate is 5%, and the market return equals 8%. Compute the company’s cost of equity capital. Round answer to one decimal place (ex: 0.0245 = 2.5%) Answer%
- Suppose you prefer the original capital structure with a 13% return on the common stock and a WACC of 11.88%. If you have $3,000 to invest, how much should you invest in the stock and bonds of the restructured firm (which have returns of 13.53% and 9%, respectively) to obtain the same return as an investment in the stock of the original firm? Enter your answers rounded to 2 DECIMAL PLACES. Amount into equity = Amount into debt =Assume that a firm can issue preferred stock that has a $70 par value and pays a 15.0% annual dividend each year. The firm's investment bankers believe that investors will be willing to pay $84.00 per share and that flotation costs will be equal to $9.97 per share. Given this information, determine the difference between the investor's required rate of return, and the firm's cost of preferred stock. 2.541% O 2.224% O 1.963% 1.398% 1.683%What is the current per-share value of JRM Corporation to an investor who requires a 0.17 annual rate of return, if JRM's current per-share dividend is $6 and is expected to remain at grow at 0.09 for the foreseeable future? what is the price of the stock
- The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The current risk-free rate of return (rRFrRF) is 4.67% while the market risk premium is 5.75%. The Jefferson Company has a beta of 0.78. Using the capital asset pricing model (CAPM) approach, Jefferson’s cost of equity is . The cost of equity using the bond yield plus risk premium approach The Jackson Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company’s cost of internal equity. Jackson’s bonds yield 11.52%, and the firm’s analysts estimate that the firm’s risk premium on its stock over its bonds is 3.55%. Based on the bond-yield-plus-risk-premium approach, Jackson’s cost of internal equity is: 18.84% 18.08% 15.07% 14.32%Assume that American Eagle Outfitters (AEO) will pay $0.18/share dividend next year. The dividend is expected to grow at a 15.5 percent rate. At the current stock price of $13.72/share, what is the return shareholders are expecting? Group of answer choices 16.81% 15.50% 17.08 % 17.32% None of these are correctA stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $56. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? A Required What is the total rate of return for the stock? B Required What is the dividend yield and percentage capital gain? C Required Now suppose the year-end stock price after the dividend is paid is $48. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)
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