____ 15. A share of common stock just paid a dividend of $1.00. If the expected long-run growth rate for this stock is 5.4%, and if investors’ required rate of return is 13.9%, what is the stock price? a. $11.04 b. $12.40 c. $13.76 d. $15.00 e. $9.42 ____ 16. If D = $1.75, g (which is constant) = 3.6%, and P = $31.00, what is the stock?s expected total return for the coming year? a. 7.75% b. 9.45% c. 10.49% d. 10.87% e. 9.64% ____ 17. Whited Inc.’s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.50% per year. The required rate of return on the stock, r , is 11.50%. What is the stock’s expected price 5 years from now? a. $43.93 b. $51.40 c. $52.27 d. $35.58 e. $53.59 ____ 18. Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $2.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell? a. $38.46 b. $46.54 c. $44.23 d. $41.54 e. $30.00 ____ 19. The Francis Company is expected to pay a dividend of D = $1.25 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.00% per year in the future. The company’s beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company’s current stock price? a. $22.83 b. $27.99 c. $27.17 d. $22.01 e. $24.18 ____ 20. Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC)for use in capital budgeting? a. Long-term debt. b. Accounts payable. c. Retained earnings. d. Common stock. e. Preferred stock. ____ 21. Duval Inc. uses only equity capital, and it has two equally-sized divisions. Division A?s cost of capital is 10.0%, Division B?s cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division A?s projects are equally risky, as are all of Division B’s projects. However, the projects of Division A are less risky than those of Division B. Which of the following projects should the firm accept? a. A Division B project with a 13% return. b. A Division B project with a 12% return. c. A Division A project with an 11% return. d. A Division A project with a 9% return. e. A Division B project with an 11% return. ____ 22. Bosio Inc.’s perpetual preferred stock sells for $75.00 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC? a. 10.39% b. 13.93% c. 14.40% d. 14.28% e. 11.81% ____ 23. Scanlon Inc.’s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following data: rRF = 4.10%; RPM = 5.25%; and b = 1.15. Based on the CAPM approach, what is the cost of equity from retained earnings? a. 7.60% b. 8.62% c. 12.67% d. 12.27% e. 10.14% ____ 24. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 13.00%. The firm will not be issuing any new stock. What is its WACC? a. 9.38% b. 11.44% c. 9.19% d. 7.22% e. 10.22% ____ 25. You were hired as a consultant to Quigley Company, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 13.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is Quigley’s WACC? a. 11.20% b. 9.99% c. 9.16% d. 9.25% e. 9.44%