( TCO D) A stock has just declared an annual dividend of $ 2.25 to be paid one year from today. The dividend is expected to grow at a 7 % annual rate. The return on equity for similar stocks is 12 %. What is P0?( Points: 20)
( TCO D) A particular bond has 8 years to maturity. It has a face value of $ 1,000. It has a YTM of 7 % and the coupons are paid semiannually at a 10 % annual rate. What does the bond currently sell for?( Points: 10)
( TCO D) A bond currently sells for $ 1,000 and has a par of $ 1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7 % and the interest payments are made semiannually. What is its YTM?( Points: 10)
( TCO D) Using examples, explain the difference between systematic risk and nonsystematic risk. Explain why the distinction is important for both investors and issuers of stock.( Points: 30)
( TCO E) A company has 10 million shares outstanding trading for $ 7 per share. It also has $ 300 million in outstanding debt. If its equity cost of capital is 15 %, and its debt cost of capital is 9 %, and its effective corporate tax rate is 40 %, what is its weighted average cost of capital?( Points: 30)
( TCO A) Relate how the job of the financial manager can be explained using the balance sheet.( Points: 25)
( TCO H) Other things being equal, would a firm prefer a longer or shorter Cash Conversion Cycle? What are some examples of ways a firm could attain this?( Points: 30)
( TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12 %. Which should the company do and why? You must use at least two capital budgeting methods. Show your work