FIN 401 Lecture Notes - Lecture 1: Risk-Free Interest Rate, Risk Premium, Market Risk

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ceruleanpig890

9 Feb 2016

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You have collected the following information on moose pastures inc. (mpi), a publicly traded company. There is a 10% coupon bond, selling at 95% of par. This bond issue pays semi-annual coupons and has 12 years to maturity. 1,000,000 shares outstanding with a book value of ,000,000. The shares are expected to pay a dividend of sh. 88 per share and the growth rate of dividends is 4. 2%. 50,000 shares of 11% preferreds, ( par value) selling for . Since the pref is selling at , it is not selling at a par. So you must calculate the cost of pref by using the perpetuity equation. Mv of equity = price * # of share outstanding. = 9. 78 * 1000000 [note: p0 = d1 / (r-g) = p0 = 0. 88/ (0. 132-0. 042) = 9. 78), note that the re is considered to be 13% only in the original problem. Mv of debt = price * of bond outstanding.

Related Questions

Finding the WACC. Given the following information for Janicek Power Co., find the WACC. Assume the companyâs tax rate is 35 percent. Debt: 8,500 7.2 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 118 percent of par; the bonds make semiannual payments. Common stock: 225,000 shares outstanding, selling for $87 per share; beta is 1.15. Preferred stock: 15,000 shares of 4.8 percent preferred stock outstanding, currently selling for $98 per share. Market: 7 percent market risk premium and 3.1 percent risk-free rate.

Just need:Debt, Annual Coupon Rate, Settlement date, Maturity date, Face value (% of par), Bond price (% of par), Coupons per year

taupecattle52

Information on Gerken Power Co., is shown below. Assume the companyâs tax rate is 35 percent.

Debt:		9,500 9 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 99 percent of par; the bonds make semiannual payments.

Common stock:		220,000 shares outstanding, selling for $84.00 per share; beta is 1.25.

Preferred stock:		13,000 shares of 5.75 percent preferred stock outstanding, currently selling for $97.00 per share.

Market:		7 percent market risk premium and 4.8 percent risk-free rate.

rubywildebeest906

Using the SML Asset W has an expected return of 11.3 percent and a beta of 1.20. If the risk-free rate is 2.4 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the relationship between portfolio expected return and portfolio beta by plotting the expected returns against the betas. What is the slope of the line that results? Bond 1: Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Bond 2: Bonds outstanding Years to Maturity Annual coupon rate Coupons per year Bond price (% of par) Common stock Shares outstanding Beta Share price Preferred stock outstanding Shares outstanding Coupon rate Share price Market Market risk premium Risk-free rate Tax rate Output Area: Capital Market Value Structure Cost Bond 1 before tax Bond 1 Bond 1 after tax Bond 2 before tax Bond 2 Bond 2 after tax Common stock Common Preferred stock Preferred Total firm $- 0.00% WACC Need the answer in an excel format

FIN 401 Lecture Notes - Lecture 1: Risk-Free Interest Rate, Risk Premium, Market Risk

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