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Explanation & Answer
Attached.
Question 1
Question 2
Question 3
Stock valuation
Initial price
Dividends
Ending price
Computation
Percentage total return
Capital gains yield
Dividend yield
Toal return
4% preferred stock
Market price
Computation
Toal return
CAPM
Stock beta
Expected market rate of return
Risk free rate
Calculation
Expected rate of return
Question 4
$100 per share
$2 per share
$125 Per share
27,00%
25,00%
1,60%
Question 5
$100 last year
$120
$4
1,2
12%
5%
13,40%
WACC
Turgeted capital stracture of common stock
Turgeted capital stracture of debt
Cost of equity
Cost of debt
Tax rate
Computation
WACC
Floatation costs
Debt-Equity ratio
New plant cost
Floatation cost for equity
Floatation cost on new debt
Calculation
Cost of the new plant if equity i...