ABC Inc., is expected to pay an annual dividend

ABC Inc., is expected to pay an annual dividend

Subject: Business    / Finance
Question
1. ABC Inc., is expected to pay an annual dividend of $0.3 per share next year. The
required return is 12.7 percent and the growth rate is 6 percent. What is the expected
value of this stock five years from now? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 2
1. A stock just paid a dividend of $2.3. The required rate of return is 9.2%, and the
constant growth rate is 7.2%. What is the current stock price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 3
1. ABC’s stock has a required rate of return of 14.1%, and it sells for $39 per share. The
dividend is expected to grow at a constant rate of 7.2% per year. What is the expected
year-end dividend, D1?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 4
1. A stock just paid a dividend of D0 = $2.3. The required rate of return is rs = 14%, and the
constant growth rate is g = 5.2%. What is the current stock price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 5
1. ABC Enterprises’ stock is currently selling for $54 per share. The dividend is projected
to increase at a constant rate of 3.1% per year. The required rate of return on the stock
is 12%. What is the stock’s expected price 5 years from today (i.e. solve for P5)? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 6
1. ABC Enterprises’ stock is expected to pay a dividend of $0.9 per share. The dividend is
projected to increase at a constant rate of 5.2% per year. The required rate of return on
the stock is 15.6%. What is the stock’s expected price 3 years from today (i.e. solve for
P3)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 7
1. A stock’s next dividend is expected to be $2.3. The required rate of return on stock
is 12.3%, and the expected constant growth rate is 3.5%. What is the stock’s current
price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 8
1. ABC is expected to pay a dividend of $3.3 per share at the end of the year. The stock
sells for $103 per share, and its required rate of return is 10.3%. The dividend is
expected to grow at some constant rate, g, forever. What is the growth rate (i.e. solve
for g)?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 9 1. ABC’s last dividend was $3.1. The dividend growth rate is expected to be constant at
20% for 3 years, after which dividends are expected to grow at a rate of 5% forever. If
the firm’s required return (rs) is 16%, what is its current stock price (i.e. solve for Po)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 10
1. The common stock of Wetmore Industries is valued at $25.6 a share. The company
increases their dividend by 4.7 percent annually and expects their next dividend to be
$3.8. What is the required rate of return on this stock?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 11
1. If last dividend = $4.1, g = 8.2%, and P0 = $67.4, what is the stock’s expected total return
for the coming year?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 12
1. ABC’s last dividend paid was $1, its required return is 18.5%, its growth rate is 6.2%,
and its growth rate is expected to be constant in the future. What is Sorenson’s
expected stock price in 7 years, i.e., what is P7?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 13
1. ABC Company’s last dividend was $4. The dividend growth rate is expected to be
constant at 17% for 2 years, after which dividends are expected to grow at a rate of 7% forever. The firm’s required return (rs) is 16%. What is its current stock price (i.e. solve
for Po)?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 14
1. The common stock of Connor, Inc., is selling for $25 a share and has a dividend yield
of 4 percent. What is the dividend amount?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 15
1. If D1 = $5.42, g (which is constant) = 2%, and P0 = $71.69, what is the stock’s expected
dividend yield for the coming year?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 16
1. If D1 = $5.1, g (which is constant) = 4.2%, and P0 = $64.8, what is the stock’s expected
total return for the coming year?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 17
1. ABC just paid a dividend of D0 = $5.9. Analysts expect the company’s dividend to grow
by 34% this year, by 21% in Year 2, and at a constant rate of 6% in Year 3 and
thereafter. The required return on this stock is 14%. What is the best estimate of the
stock’s current market value? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 18
1. A stock is expected to pay a dividend of $1.6 at the end of the year. The required rate of
return is rs = 9.6%, and the expected constant growth rate is g = 7.1%. What is the
stock’s current price?
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the
answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points
Question 19
1. ABC Industries will pay a dividend of $1 next year on their common stock. The company
predicts that the dividend will increase by 5 percent each year indefinitely. What is the
dividend yield if the stock is selling for $26 a share?
Enter your answer in percentages rounded off to two decimal points. DO not enter % in the
answer box. 1 points
Question 20
1. The 8.5 percent annual coupon bonds of the ABC Co. are selling for $1,179. The bonds
mature in 12 years. The bonds have a par value of $1,000. If the tax rate is 30%, what is
the after-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 21
1. The 7 percent annual coupon bonds of the ABC Co. are selling for $950.41. The bonds
mature in 8 years. The bonds have a par value of $1,000 and payments are made semiannually. If the tax rate is 35%, what is the after-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 22
1. Several years ago, the ABC Company sold a $1,000 par value bond that now has 20
years to maturity and a 7.00% annual coupon that is paid semiannually. The bond
currently sells for $925 and the company’s tax rate is 40%. What is the after-tax cost of
debt? 1 points
Question 23
1. If the market value of debt is $165,626, market value of preferred stock is $54,755, and
market value of common equity is 349,177, what is the weight of preferred stock?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 24
1. ABC Industries will pay a dividend of $1 next year on their common stock. The company
predicts that the dividend will increase by 4 percent each year indefinitely. What is the
firm’s cost of equity if the stock is selling for $39 a share?
Enter your answer in percentages rounded off to two decimal points. DO not enter % in the
answer box. 1 points
Question 25
1. ABC, Inc., has 712 shares of common stock outstanding at a price of $31 a share. They
also have 212 shares of preferred stock outstanding at a price of $86 a share. There are
811, 8 percent bonds outstanding that are priced at $79. The bonds mature in 16 years
and pay interest semiannually. What is the capital structure weight of the preferred
stock?
Enter your answer as a percentage rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 26 1. The before-tax cost of debt is 10.7 percent. What is the after-tax cost of debt if the tax
rate is 41 percent?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 27
1. ABC Inc.’s perpetual preferred stock sells for $74.8 per share, and it pays an $5.1
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?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 28
1. The 8 percent annual coupon bonds of the ABC Co. are selling for $880.76. The bonds
mature in 10 years. The bonds have a par value of $1,000 and payments are made
semi-annually? What is the before-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 29
1. You were hired as a consultant to ABC Company, whose target capital structure is 35%
debt, 15% preferred, and 50% common equity. The before-tax cost of debt is 6.50%, the
yield on the preferred is 6.00%, the cost of common stock is 11.25%, and the tax rate is
40%. What is the WACC?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 30
1. The ABC Company has a cost of equity of 24.2 percent, a pre-tax cost of debt of 7.1
percent, and a tax rate of 31 percent. What is the firm’s weighted average cost of capital
if the proportion of debt is 43.5%? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer
box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box. 1 points
Question 31
1.
The 8 percent annual coupon bonds of the ABC Co. are selling for $1,080.69. The bonds
mature in 10 years. The bonds have a par value of $1,000. What is the before-tax cost of debt?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box. 1 points
Question 32
1. If the market value of debt is $148,729, market value of preferred stock is $93,604, and
market value of common equity is 244,809, what is the weight of common equity?
Enter your answer in percentages rounded off to two decimal points. Do not enter % in the
answer box.