FINC 400 71:CH 9-1 HW

Cost of preferred stock   

Taylor Systems has just issued preferred stock. The stock has a 11​% annual dividend and a $50 par value and was sold at ​$54.50 per share. In​ addition, flotation costs of ​$4.50 per share were paid. Calculate the cost of the preferred stock.

The cost of the preferred stock is nothing​%. ​(Round to two decimal​ places.)

Cost of common stock equityCAPM

  ​ J&M Corporation common stock has a​ beta, b​, of 1.3. The​ risk-free rate is 9%​, and the market return is 16​%.a.  Determine the risk premium on​ J&M common stock.b.  Determine the required return that​ J&M common stock should provide.c.  Determine​ J&M’s cost of common stock equity using the CAPM.a.  The risk premium on​ J&M common stock is nothing​%. ​(Round to one decimal​ place)

Cost of common stock equity

   Ross Textiles wishes to measure its cost of common stock equity. The​ firm’s stock is currently selling for ​$51.29. The firm expects to pay a ​$3.31 dividend at the end of the year​ (2016). The dividends for the past 5 years are shown in the following​ table: ​(Click on the icon located on the​ top-right corner of the data table below in order to copy its contents into a​ spreadsheet.)

YearDividend per Share
2015​$3.01
2014​$2.71
2013​$2.55
2012​$2.19
2011​$2.06

After underpricing and flotation​ costs, the firm expects to net ​$45.14 per share on a new issue.a.  Determine the growth rate of dividends from 2011 to 2015.b. Determine the net​ proceeds, Nn​, that the firm will actually receive.c.  Using the​ constant-growth valuation​ model, determine the cost of retained​ earnings, rs.d.  Using the​ constant-growth valuation​ model, determine the cost of new common​ stock, rn.a.  The growth rate of dividends from 2011 to 2015 is nothing​%. ​(Round to two decimal​ places.)

The effect of tax rate on WACC 

  K. Bell Jewelers wishes to explore the effect on its cost of capital of the rate at which the company pays taxes. The firm wishes to maintain a capital structure of 20​% ​debt, 15​% preferred​ stock, and 65% common stock. The cost of financing with retained earnings is 13​%, the cost of preferred stock financing is 9​%, and the​ before-tax cost of debt financing is 11​%. Calculate the weighted average cost of capital ​(WACC​) given a tax rate of 40%.The​ firm’s WACC is nothing​%. ​(Round to two decimal​ places.)

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