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Exam (elaborations)

FNAN 522 Mod 3 with complete verified solutions 2025.

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FNAN 522 Mod 3 with complete verified solutions 2025.

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FNAN 522 Mod 3 with complete
verified solutions 2025
A company has a risk free rate of 3% and a risk premium of 6%. Its
tax rate is 35%. What is the company's cost of debt?
Select one:
a.5.85%
b.3.15%
c.3.90%
d.2.10% - answer 5.85%


A company is thinking of issuing more common stock. Its stock's
current market price is $50 a share with an expected dividend
annual one year from today of $3 a share. Dividends are expected to
grow 5% per year and there are no flotation costs. What is the
company cost of new common stock?
Select one:
a.
13.65%
b.
65%
c.
12.58%
d.
11.00% - answer 11.00%


A company has retained earnings of $1.5 million and net income of
$8 million. What is the retention ratio (expressed as a decimal)?
Select one:
a.

, 0.1875
b.
0.8125
c.
0.08125
d.
0.01875 - answer 0.1875


A company makes an initial $10,000 investment in a project. This
project is projected to earn $8000 in year one, $10,000 in year 2,
$12,000 in year 3, and $20,000 in year 4. If the WACC is 5%, what is
the project's present value?
Select one:
a.
$33,509
b.
$43,509
c.
$37,619
d.
$40,000 - answer $33,509


MV Corporation has debt with market value of $100 million, common
equity with a book value of $104 million, and preferred stock worth
$17 million outstanding. Its common equity trades at $55 per share,
and the firm has 6.1 million shares outstanding. What weights
should MV Corporation use in its WACC?
Select one:
a.
There is not enough information to answer this question.

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