FIN 515 Week 6 Exam Set 2

Apr 24th, 2015
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FIN 515 Week 6 Exam Set 2

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1. (TCO D) A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price? (Points : 10) $16.28$16.70$17.13$17.57$18.012. (TCO D) If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, what is the stock's expected total return for the coming year? (Points : 10) 7.54%7.73%7.93%8.13%8.34%3. (TCO D) Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? (Points : 10) $104.27$106.95$109.69$112.50$115.384. (TCO E) Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting? (Points : 10) Long-term debtAccounts payableRetained earningsCommon stockPreferred stock5. (TCO E) Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A's cost of capital is 10.0%, Division B's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A's projects are equal

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