Finance Homework
June 19th, 2022
1) Given the following information for UARE Inc. Find the WACC.
| Tax rate | 35 percent |
| Debt: | |
| Bonds outstanding: | 6000 |
| Coupon on bonds: | 6 percent |
| Par value of bonds: | $1000 |
| Bonds selling at what percent of par: | 105 |
| Bonds make coupon payments: | semi-annually |
| Years to maturity of bonds | 25 |
| Common Stock: | |
| Shares Outstanding: | 185,000 |
| Current price/share: | $58.00 |
| Beta: | 1.10 |
| Market Information: | |
| Risk premium: | 7 percent |
| Risk-free rate | 5 percent |
2) Riddle Industries has the following parameters related to its stock and firm.
| Beta: | 0.85 |
| Recent Dividend | 0.75 dollars |
| Dividend Growth Rate | 4.5 percent |
| Expected return on market | 12.5 percent |
| Treasury Bills Yield | 4.3 percent |
| Most recent stock price | 64.00 dollars |
What is the cost of equity using DDM? What is the cost of equity using SML?
3) Eaglet Corporation has the following target and costs associated with its capital structure. Based on these parameters what is Eaglet Corporations weighted average cost of capital?
| Target common equity weight: | 50 percent |
| Target debt weight: | 50 percent |
| Cost of equity: | 12 percent |
| Cost of debt: | 4 percent |
| Tax rate: | 35 percent |
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