Risk and Return: The CAPM and Valuing a Firm
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19.Determine what the Beta is for a firm that has the following characteristics: (a) Expected Return on the Company's Stock is 13%, (b) Risk Free Rate of Return is 3%, and (c) The Market's Return is expected to be 10%.
20. Using the 'constant growth model', determine what the investor's required rate of return is given the following information: (a) The dividend that was just paid was $2.25, (b) The Company's Growth Rate is 6%, and (c) The Stock is Currently Trading at $20.00.
21. Determine what the required rate of return on preferred stock must be, given the following information: (a) Coupon--$5.00 and (b) Price--$35.50.
22. Calculate the weighted cost of debt for a firm with the following characteristics: (a) Weight of Debt---45%, (b) Average Coupon--$50, (c) NPER 20, (d) Average Price of Bonds--$800, and (d) Tax Rate 32%.
23.Calculate the weighted cost of equity for a firm with the following characteristics: (a) Betaâ?"1.2, (b) Risk Free Rate of Return 4%, (c) Market Rate of Return 8%, and (d) Weight of Equity Capital 40%.
24.Calculate the weighted cost of preferred stock for a firm with the following characteristics: (a) Weight of Preferred Stock 30%, (b) Coupon $5.75, and (c) Price of Preferred Stock $75.00.
25.Calculate the weighted average c
ost of capital for a firm with the following characteristics: (a) Equity--$500,000, (b) Debt--$500,000, (c) Preferred Stock $50,000, (d) Average Price of Bonds $925, (e) NPER 25, (f) Coupon Rate 6%, (g) Tax Rate 31%, (h) Beta 1.25, (i) Market Rate of Return 8%, (j) Risk Free Rate 2%, (k) Coupon on Preferred $3.00, and (l) Price of Preferred Stock $50.00
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