FIN 571 Week 4 Connect Problems Solutions (2017 version) Homework | Page 2

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
The risk premium for an individual security is computed by :
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 ?
Central Systems , Inc . desires a weighted average cost of capital of 7 percent . The firm has an after-tax cost of debt of 5 percent and a cost of equity of 10 percent . What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital ?
Miller Manufacturing has a target debt – equity ratio of . 60 . Its cost of equity is 15 percent , and its cost of debt is 4 percent . If the tax rate is 35 percent , what is the company ’ s WACC ?
Filer Manufacturing has 9 million shares of common stock outstanding . The current share price is $ 75 , and the book value per share is $ 6 . The company also has two bond issues outstanding . The first bond issue has a face value $ 85 million , a coupon of 10 percent , and sells for 96 percent of par . The second issue has a face value of $ 65 million , a coupon of 11 percent , and sells for 109 percent of par . The first issue matures in 25 years , the second in 9 years .
Titan Mining Corporation has 10.1 million shares of common stock outstanding and 450,000 5 percent semiannual bonds outstanding , par value $ 1,000 each . The common stock currently sells for $ 49 per share and has a beta of 1.55 , and the bonds have 15 years to maturity and sell for 116 percent of par . The market risk premium is 8.9 percent , Tbills are yielding 4 percent , and the company ’ s tax rate is 38 percent .