FIN 571 Course Great Wisdom / tutorialrank.com FIN 571 Course Great Wisdom / tutorialrank.com | Page 41

6.Ayden, Inc., has an issue of preferred stock outstanding that pays a
dividend of $6.75 every year, in perpetuity. This issue currently sells
for $93 per share.What is the required return?
7.Zoom stock has a beta of 1.46. The risk-free rate of return is 3.07
percent and the market rate of return is 11.81 percent. What is the
amount of the risk premium on Zoom stock?
8.The risk premium for an individual security is computed by:
9.The risk-free rate of return is 3.68 percent and the market risk
premium is 7.84 percent. What is the expected rate of return on a
stock with a beta of 1.32?
10.Mullineaux Corporation has a target capital structure of 70 percent
common stock and 30 percent debt. Its cost of equity is 18 percent,
and the cost of debt is 6 percent. The relevant tax rate is 30
percent.What is the company’s WACC?
11.iller Manufacturing has a target debt–equity ratio of .55. Its cost of
equity is 14 percent, and its cost of debt is 9 percent. If the tax rate is
40 percent, what is the company’s WACC?
12.Filer Manufacturing has 4 million shares of common stock
outstanding. The current share price is $76, and the book value per
share is $5. The company also has two bond issues outstanding. The
first bond issue has a face value $90 million, a coupon of 5 percent,
and sells for 94 percent of par. The second issue has a face value of
$70 million, a coupon of 6 percent, and sells for 104 percent of par.
The first issue matures in 20 years, the second in 3 years.
a.
What are the company's capital structure weights on a book
value basis?
b. What are the company's capital structure weights on a market
value basis?
c.

Which are more relevant?