Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- If an investor buys shares in a closed-end investment company for $46 and the net asset value is $53, what is the discount? If the company distributes $1, the net asset value rises to $58, and the investor sells the shares for a premium of 5 percent over the net asset value, what is the percentage earned on the investment?arrow_forwardStout Inc.'s perpetual preferred stock sells for $65.00 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? a. 10.39% b. 13.62% c. 14.40% d. 14.28% e. 11.81%arrow_forwardThe preferred stock of PAY Inc. pays an annual dividend of $3.75 and sells for $47.80 a share. What is the rate of return on this security?arrow_forward
- The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets $ 38,000,000 101,000,000 $139,000,000 Current assets Net plant, property, and equipment Total assets Liabilities and Equity Accounts payable $ 10,000,000 9,000,000 $ 19,000,000 40,000,000 $ 59,000,000 Accruals Current liabilities Long-term debt (40,000 bonds, S1,000 par value) Total liabilities Common stock (10,000,000 shares) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 30,000,000 _50,000,000 _80,000,000 $139,000,000 The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is…arrow_forwardSammy’s Treats’ stock is trading at $50 and also pays an annual dividend of $2 per share. How much is the dividend yield?arrow_forwardA company’s preferred stock currently trades for $50 per share andpays a $3 annual dividend. Flotation costs are equal to 3% of thegross proceeds. If the company issues preferred stock, what is thecost of that stock? (6.19%)arrow_forward
- A company's perpetual preferred stock currently sells for $90.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the issue price. What is the firm's cost of preferred stock? Group of answer choices 8.66% 8.93% 9.21% 9.12% 9.95%arrow_forwardABC issued a series of preference share that currently pay dividend of $3.45 per share in perpetuity. What is the current market price of ABC shares if required rate of return is 12% p.a.arrow_forwardA company's perpetual preferred stock currently sells for $102.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.0o% of the issue price. What is the firm's cost of preferred stock? A a. 9.28% b. 8.22% c. 9.53% O d. 6.90% e. 7.97%arrow_forward
- The Beautiful Flower Company. has earnings of $1.44 per sharee. a. If the benchmark PE for the company is 13, how much will you pay for the stock? b. If the benchmark PE for the company is 16, how much will you pay for the stock?arrow_forwardXYZ issued a series of preference share that currently pay dividend of $4.55 per share in perpetuity. What is the current market price of XYZ shares if required rate of return is 11% p.a.arrow_forwardYou buy a share on 1 January for $35.13 and sell it on 31 December for $39.68. During the year the share pays dividends of $1.16 on 1 April, $2.42 on 1 July and $2.17 on 1 October. What is your realised return? a. 3.0242% b. 29.3197% c. 3.4159% d. 25.9577%arrow_forward
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