Hardy Locks, Inc. common shares sell for $32 per share. The firm expects to set their...

60.1K

Verified Solution

Question

Finance

Hardy Locks, Inc. common shares sell for $32 per share. The firmexpects to set their next annual dividend at $2 per share and itexpects future dividends to grow at 8 percent per year,indefinitely. The current risk-free rate is 2 percent, the expectedrate on the market is 10 percent, and the stock has a beta of 1.5.Using the constant growth model, the firm's cost of equity is morethan 13.75 percent but less than 14.50 percent
Select one:
True
False
Tall Fences, Inc. has a $4 million ($1000 face value) 10-yearbond issue selling for 107.5 percent of par that carries a couponrate of 7.6 percent, paid semi-annually. As a result, the firm’sbefore-tax component cost of debt is more than 6.75 percent butless than 7.25%
Select one:
True
False
A firm has 70,000 shares of common stock outstanding, 10,000shares of preferred stock outstanding, and 1,000 bonds with amarket value of $994,000. If the common shares are selling for $40per share and the preferred shares are selling for $45 per share,then the weight used for common stock in the computation of theWACC for this firm is less than 67.5 percent but more than 64.5percent
Select one:
True
False

Answer & Explanation Solved by verified expert

4.2 Ratings (775 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Hardy Locks, Inc. common shares sell for $32 per share. The firmexpects to set their next annual dividend at $2 per share and itexpects future dividends to grow at 8 percent per year,indefinitely. The current risk-free rate is 2 percent, the expectedrate on the market is 10 percent, and the stock has a beta of 1.5.Using the constant growth model, the firm's cost of equity is morethan 13.75 percent but less than 14.50 percentSelect one:TrueFalseTall Fences, Inc. has a $4 million ($1000 face value) 10-yearbond issue selling for 107.5 percent of par that carries a couponrate of 7.6 percent, paid semi-annually. As a result, the firm’sbefore-tax component cost of debt is more than 6.75 percent butless than 7.25%Select one:TrueFalseA firm has 70,000 shares of common stock outstanding, 10,000shares of preferred stock outstanding, and 1,000 bonds with amarket value of $994,000. If the common shares are selling for $40per share and the preferred shares are selling for $45 per share,then the weight used for common stock in the computation of theWACC for this firm is less than 67.5 percent but more than 64.5percentSelect one:TrueFalse