Finance assignment

1.     Using the dividend discount model, what is the cost of equity capital for Zeller Mining if the company will pay a dividend of C$2.30 next year, has a payout ratio of 30%, a return on equity (ROE) of 15%, and a stock price of C$45?

2.     Dot.Comhasdeterminedthatitcouldissue$1,000face valuebondswithan8%coupon

paidsemiannuallyand afive-yearmaturityat$900perbond.IfDot.Com’smarginaltaxrateis38%,itsafter-taxcostofdebtis?

3.     MorganInsuranceLtd.issuedafixed-rateperpetualpreferredstockthreeyearsagoand

placedit privatelywithinstitutionalinvestors.Thestockwasissuedat$25persharewitha$1.75dividend.Ifthecompanyweretoissuepreferredstocktoday,theyieldwouldbe 6.5%.Thestock’scurrentvalueis:

4.     Fran McClureofAlbaAdvisersisestimatingthecostofcapitalofFrontierCorporation aspartofhervaluationanalysisofFrontier.McClurewillbeusingthisestimate,along with projectedcashflowsfromFrontier’snewprojects,toestimatetheeffectofthesenew projectsonthevalueofFrontier.McClurehasgatheredthefollowinginformationon FrontierCorporation:

TheweightsthatMcClureshouldapplyinestimatingFrontier’scostof capitalfordebtandequityare,respectively:

5.           Trumpit Resorts Company currently has 1.2 million common shares of stock out- standing and the stock has a beta of 2.2. It also has $10 million face value of bonds that have five years remaining to maturity and 8% coupon with semiannual payments, and are priced to yield 13.65%. If Trumpit issues up to $2.5 million of new bonds, the bonds will be priced at par and have a yield of 13.65%; if it issues bonds beyond $2.5 million, the expected yield on the entire issuance will be 16%. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3% and the expected market return is 10%. Trumpit’s marginal tax rate is 30%. If Trumpit raises $7.5 million of new capital while maintaining the same debt-to-equity ratio, its weighted average cost of capital is?