1. Suppose the company is expected to pay a divided of $2.5 and the required rate of return is 10% and the growth rate is 4%. What is the price of the stock after 5 years? after 10 years? after 12 years?
2. Suppose the company just paid a divided of $2.5 and the required rate of return is 10% and the growth rate is 4%. What is the price of the stock after 5 years? after 10 years? after 12 years?
3. ABC's stock is currently selling for $60 per share. The firm is expected to pay a dividend of $3.60. If the cost of equity is 9%, compute the growth rate
4. Suppose the company just paid dividend of $1. The dividends are expected to grow at 20% in Year 1 and 15% in Year 2. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.
5. Suppose the company just paid dividend of $1. The dividends are expected to grow at 25% in Year 1 and 20% in Year 2, and 15% in Year 3. After that, the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.
6. Suppose the company will not pay any dividends in Years 1 and 2. Suppose that the company pays dividend of $1 in Year 3 and after that the dividends will grow at 20% for the next two years. After that the dividends will grow at a constant rate of 5% forever. If the required rate of return is 10%, compute today's price of the stock.
7. ABC Inc.'s perpetual preferred stock sells for $100 per share, and it pays an $10 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of $4 per share. What is the company's cost of preferred stock for use in calculating the WACC?
8. The ABC Company has a cost of equity of 21%, a pre-tax cost of debt of 10% percent, and a tax rate of 30 percent. What is the firm's weighted average cost of capital if the proportion of debt is 40%?
9. You were hired as a consultant to ABC Company, whose target capital structure is 50% debt, 35% preferred, and 15% common equity. The before-tax cost of debt is 8%, the yield on the preferred is 10%, the cost of common stock is 15%, and the tax rate is 25%. What is the WACC?
10. ABC, Inc., has 1000 shares of common stock outstanding at a price of $50 a share. They also have 100 shares of preferred stock outstanding at a price of $45 a share. There are 200, 8 percent bonds outstanding that are priced at $89. The bonds mature in 16 years and pay interest semiannually. What is the capital structure weight of the common stock? What is the capital structure weight of preferred stock? What is the capital structure weight of debt?