FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 44

related to CAPM, WACC, and Flotation Costs to understand the
influence of debt and equity on the company's capital structure.
Assignment Steps Resources: Corporate Finance Calculate the
following problems and provide an overall summary of how
companies make financial decisions in no more than 700 words, based
on your answers: 1. 1) Stock Valuation: A stock has an initial price of
$100 per share, paid a dividend of $2.00 per share during the year,
and had an ending share price of $125. Compute the percentage total
return, capital gains yield, and dividend yield. 2. 3.
2) Total
Return: You bought a share of 4% preferred stock for $100 last year.
The market price for your stock is now $120. What was your total
return for last year? 4. 5.
3) CAPM: A stock has a beta of 1.20, the
expected market rate of return is 12%, and a risk-free rate of 5
percent. What is the expected rate of return of the stock? 6. 7.
4)
WACC: The Corporation has a targeted capital structure of 80%
common stock and 20% debt. The cost of equity is 12% and the cost
of debt is 7%. The tax rate is 30%. What is the company's weighted
average cost of capital (WACC)? 8. 9.
5) Flotation Costs:
Medina Corp. has a debt-equity ratio of .75. The company is
considering a new plant that will cost $125 million to build. When the
company issues new equity, it incurs a flotation cost of 10%. The
flotation cost on new debt is 4%. What is the initial cost of the plant if
the company raises all equity externally? 10. Secondly: he purpose of
this assignment is to allow the student an opportunity to explain what
it means to have an efficient capital market. Students will gain an
understanding of the different levels of market efficiency and how
behavioral finance can inhibit reaching market transparency.
Assignment Steps Resources: Microsoft® Word Explain in 525 words
what it means to have efficient capital market, including: •
Describe the behavioral challenges in achieving
efficiency. •
Discuss the three forms of market efficiency. •
What are the implications to corporate finance? •
Would you consider the real estate market an
efficient capital market? Please explain why or why not.
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FIN 571 Week 4 Connect Problems