Problem 12.04 -Sixth Fourth Bank
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition
Determine the cost of preferred stock for Sixth Fourth Bank.
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Determine the cost of preferred stock for Sixth Fourth Bank.
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Find the average annual return on large-company stocks in nominal and real terms.
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Using long-term government bonds, corporate bonds, and inflation… find the historical real return on long-term government and corporate bonds.
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Given the years, the percent of face value, and the tax rate, determine the pretax cost of debt and the aftertax cost of debt for Jiminy’s Cricket Farm.
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Find the company’s WACC given a target debt-equity ratio, the cost of equity capital, the pretax cost of debt, and the tax rate.
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Find the company’s WACC.
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Given the stock returns, find the arithmetic and geometric average returns.
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Given the stock beta, stock selling amount, year-end dividend, T-bill rate, and market risk premium… calculate the stock price at the end of the year.
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Given the stock beta, stock selling amount, year-end dividend, T-bill rate, and market risk premium and what investors believe the stock will sell for…. find out if its a good or bad buy, if the investors will invest, and what price the stock will be at equilibrium.
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Given the table with the company and betas, risk-free rate of interest, and risk premium… find each company’s expected rate of return using CAPM.
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