Unit4-problems

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+h , r l i · i r \n n r \ i i o \ r っ 丁 h + _ to ta l re t u rn . $1. 2o pe r s h a r e d u r i n g t h e y e a r, a n d ha

d a n e n d i n g s h a re p r i c e of $ 82 . Co m p ute th e p e r cew

1. c a l c u l a t i n g R e t u r n s s u p p o s e a s t o c k h a d a n i n it i a l p r i c e of $ 7 3 P e r s h a re , paid a diiv\dend

q n U r n U D L C v ?

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from 1926 through 1932? 16, Calculating R ea l R et u r n s a f e r to

Tab le 10 . 1. What w as the average real retuĺn ìot Tīeasuľ g\ dividends , The current s h a re p rice is $44. 07. What is fne APR ot youM vesM enť ł Th e M R?

15, calculating Ret u rn s You bo u g ht a stock th ree m onfns ago tor $41, 75 per share . The stock pziiù

market price for you r stoc k is now $96. 20, Wha t is your tota \ r e Mm tor \ astear ? 14, calculati

n g R etu r n s Yo u b o ug ht a sh are of 4 . 2 percent preterred s c k tor $94. 83 \ ast ear . The

what was yo ur tota l retu rn fo r th e p ast ye a r?

interest rate is n ow 6 . 5 Pe rc e nt . If the b on d h ad 2 0 Y e a r s to m aturw wh en you oT g naw putm as eù R ,

13, calcu lat in g R e t u r n

s Yo u p u rc h a s e d a ze ro co up on b ond one year ago torr $289 , 73. The m a cM

return for th e s toc k ?

J2, Hol d in g p e r

i o d R e t u r n A s to c k h a s h a d ret u rn s of - 18. 35 perce nt , 14. 72 percen t , 28. 47 percen t ,

1l . ca lcu lat i

n g R e a l R a t e s G i v e n t h e i n fo rm a t io n i n P rob l e m 1o , w hat w as M e av era ge rea l Ŋ\s k - l tee

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resl oecfve wha t is the exp ected re tu r n o n th e p o r tfo l io ? h ves ted )n s h ek B . If the expec ted r et ur ns o n th e s e s to c k s a re 9 . 5 pe rc e nt a n d 15 . 2 percent,

Z por l l ioüo E x p e c h d Re t u r n Yo u o w n a p o r tfo l i o t h a t h a s $3, 900 inve ste d in S t o c k A a n0 $5, 700

1. De term i n i n g p o r t l io l i o w e ights Wh a t a re fn e p o r tfo l io w e ig h t s f o r a p o r tfo l io t h at h as 95 s hargsq*

AN D P R OB L E M S

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3. ï p e r e e n t . w ha t m u s t th e e x p e c te d r e t u r n

o n t h e m a rk e t b e ' ?

ĺ ą\ \L

歹属 l l s i r g C A P M A s t o c k h a s a n e x p e c te d r e

tu r n o f 9 . 2 pe r c e nt , its b e \a i s . 85, a n üh e [\şk NĘĘ

t +e m a r k e t 【 ¢s k p f e m i u m / 5 7 . 2 p e r e e n t . Wh a t m u s t th e b e ta o f th is s to c k b e ? Percent, a n q

歹 3 . u s i n g c A p M A s to c k h a s a n e x p e c t e d r e t u r n o f 1 1 . 5 Pe r c e n t , th e r i s k - tr e e r a l e l 8 2 . 8

n s k - / e ï ? l iE? / 5 3 . 4 p e f c e n i . W ha t m u s t t h e e x p e c te d r e t u r n o n t h i s s to c k b e ?

pe rcent ,

. l l s l i n gr t - A s o c k h a s a b e t a o f . 85, t h e e x p e c t e d r e t u r n o n t h e m a r k e t i s l l . ' "

- Ġ

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n n R t o f D e b t A d v a n c e , In c . , i s t r y i n g t o d e t e

r m i n e i t s c o st of d e bt . The fi rm h◆ '"

ł s C

e q u i t y c a p i t a l ? fr e e ra t e i s 3 . 5 pe r c e n t a n d

t h e e x p e c t e d r e t u r n o n t h e m a rk e t i s 1 ' " '" "

, w hat is : , 1. c a l c u l a t i n g c o s t o f E q u i

t y T h e D y b v i g C o r p o r a t i o n

' s c o m m o n s to c k h a s a b eta of

A N D P R O B L E M S

け ー

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What is Fama 's debt- equ ity ratio? Thecompanycostofegui tvi s 13percent, and its cost of d e bt is 6 . 5 pe c ent . The tax rate ls 35 percent,

7 Ffn d【ifrg the C ap i tal S tru c ture Fam a s LIam as h as a w e ig hted ave ra g e c os t of ca p ital ot 9 . 8 percent. /4per cen Ł an d i ts cos t of deb t is 7 p erce

nt . If the tax rate is 35 p e rc e nt , w hat is M iNer's WACC? 6, fa i re s a n d w « CC M i l ler M an ul ac tu r in g h as a ta

rg et d e bt - eq u ity rat io of . 55. \ ts cost oī equi \s

rate is 35 p e rc e nt . What is M ul l ineaux ' s WACC?

an d 3o p ereen t d eb t. Its c os t of e q u iv is 13 p e rc e nt , a n d the cost of d e bt is 6 p e rc e nt . The relevan\tax

5. c al c u l a M g w Ac c M u Mn ea ux c orp ora t ion h a s a ta rg et

c a p ita l st ru ct u re of 7 0 p e rc ent com mon ot k

U C O T ú J l l