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1) ABC’s firm has expected earnings before interest and taxes of $1,800. Its unlevered cost of capital is 12% and its tax rate is 33%. The firm has debt with both book and face value of $2,900. This debt has an 8% coupon and pays interest annually. Determine the firm's weighted average cost of capital?

2) You own 260 shares of XYA, Inc. stock. Company has stated that it plans on issuing the dividend of $.50 a share at the ending of this year and then issuing the final liquidating dividend of $2.05 a share at the ending of next year. Your necessary rate of return on this security is 10%. Ignoring taxes, find out the value of one share of this stock today?

i) $2.37
ii) $2.11
iii) $2.60
iv) $2.15

Basic Finance, Finance

  • Category:- Basic Finance
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