Finance final study guide Essay

of tax is 40%, it means that before tax cost of capital is 6.5% and after tax cost of capital is 3.9%.

Assuming that Plyler did not buy back or redeem any of its shares, how much new common stock did it issue in 2015?

Company issues 15,000 shares of stock @ $200 per share to raise $3,000,000 in capital with 5% return (cost of equity)

1. Apple Corporation has 2.5 million shares outstanding with a market value of $2.00 each (expected return = 16%) and debt with a market value of $1, 000,000 and a return of 10%

| (TCO C) Pate & Co. has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15 percent debt and 85 percent equity. The company forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?

23) Danroy Inc has announced a $5 dividend. If Danroy's last price while trading cum-dividend is $65, what should its first ex-dividend price be (assuming perfect capital markets)?

The book value regards past costs of assets. The market value is the price of the share multiplied with the numbers of outstanding shares. The current book value of the company is 792,170 in 2004 and 692,000 in 2003 (Equity of ever year). The current market value of the company is 1,100,000 (price per share x amount of outstanding shares).

a. What risk-free rate and risk premium did you use to calculate the cost of equity?

valuation of many assets in the firm’s financial statements. It is also tied to the demand for

Book value per common share is a measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders. Also, this measurement is used by investors to evaluate the price of a company's common stock. Since the market value per share is higher than the book value per share, the stock price may be

The cost of new equity for the firm will be 11% using the following formula:

Thus the WAVG Cost of Debt (including L/T debt and preferred stock) = rd = 8.633%

Both firms are expected to generate cash flows of $50 million per year for the foreseeable future and the market value of the equity of ABC, Inc is $500 million. Estimate the return on equity of XYZ, Inc. Assume there are no taxes, and the risk-free rate is 4%. (No more than two decimals in the percentage interest rate, but do not enter the % sign.)

Alpha, Inc., has debt that is viewed by the market as risk-less with a market value of $500 million. Beta, Inc., has no debt. Both firms are expected to generate cash flows of $100 million per year for the foreseeable future and the market value of the equity of Beta, Inc is $1 billion. Estimate the return on equity of Alpha, Inc. Assume there are no taxes, and the risk-free rate is 5%. (No more than two decimals in the percentage interest rate, but do not enter the % sign.)

Price to book ratio tells an investor how much he or she is paying for one dollar of net assets, with net assets equal to total assets minus total liabilities. According to the key statistics data provided by Yahoo Finance (2012), the Price/Book ratio is 3.44. Book value per share is the proceeds per share that would be received if all the firm’s assets were sold for the exact book value. The proceeds are what is remaining after paying all liabilities and then divided among common stockholders.