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- CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company’s stock currently trades at $60 per share. Compute the stock’s earnings per share (EPS). What is the stock’s P/E ratio? Determine what the stock’s dividend yield would be if it paid $1.75 per share to common stockholders.Ratio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?
- The Cost of Equity and Flotation Costs Messman Manufacturing will issue common stock to the public for $30. The expected dividend and the growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 10% of the issue’s gross proceeds, what is the cost of external equity, re?Reno Revolvere has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?The preferred stock of KICO store, is selling currently at RM47.13. If the required rate of return is 12.2 percent, what is the dividend paid by this stock?
- q4- Gamma Ltd's net profit for the last financial year was $179,000 and it paid $113,000 in dividends. It expects net profit to grow at 2.6% p.a. in perpetuity and to maintain a constant dividend payout ratio. Its beta is 1.9, the risk-free rate is 2.1% and the equity risk premium is 6.8%. What is its justified forward P/E/ ratio? a. 5.08 b. 2.97 c. 3.05 d. 5.21 Clear my choiceThe investment banking firm of Stan Inc. will use a dividend valuation model to appraise the shares of the DB Corporation. Dividends (D) at the end of the current year will be P1.20. The growth rate (g) is 9% and the discount rate (K) is 13%?The Evanec Company's next expected dividend, D1, is $3.50; its growth rate is 5%; and its common stock now sells for $38.00. New stock (external equity) can be sold to net $34.20 per share. A) What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places.rs = % B) What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.F = % C) What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. re = %
- Kuih Bakar Berhad common stocks are currently selling for RM32.35. The last annual dividend paid was RM1.10 per share and the market rate of return is 10.7 percent. At what rate is the dividend growing? Select one: A. 7.06 percent B. 10.42 percent C. 12.60 percent D. 8.67 percentA company just paid a dividend of s1 per share. If the dividend growth rate is projected at 5 percent, the payout ratio is 50 percent and the discount rate is 10 percent which of the following statements is are correct? STATEMENT I The stock price is expected to increase by 10 percent in the coming year. STATEMENT I The stock's P/E ratio based on current earnings would be 10,5 Al only B. ll only O C Both land it D. Neither inorThe current stock price of National Co. is P89. The current dividend for National Co. is P2.50, and dividends are expected to grow at a constant rate of 8%. The implied required return for National Co. is closest to