Rate of Return for Stocks and Bonds

Purpose of Assignment

The purpose of this assignment is to allow the student an opportunity to calculate the rate of return of equity and debt instruments. It allows the student to understand the effects of dividends; capital gains; inflation rates; and how the nominal rate of return affects valuation and pricing. The assignment also allows the student to apply concepts related to CAPM, WACC, and Flotation Costs to understand the influence of debt and equity on the company’s capital structure.

Assignment Steps

Resources: Corporate Finance

Calculate the following problems and provide an overall summary of how companies make financial decisions in no more than 700 words, based on your answers:

1. Stock Valuation: A stock has an initial price of \$100 per share, paid a dividend of \$2.00 per share during the year, and had an ending share price of \$125. Compute the percentage total return, capital gains yield, and dividend yield.
2. Total Return: You bought a share of 4% preferred stock for \$100 last year. The market price for your stock is now \$120. What was your total return for last year?
3. CAPM: A stock has a beta of 1.20, the expected market rate of return is 12%, and a risk-free rate of 5 percent. What is the expected rate of return of the stock?
4. WACC: The Corporation has a targeted capital structure of 80% common stock and 20% debt. The cost of equity is 12% and the cost of debt is 7%. The tax rate is 30%. What is the company’s weighted average cost of capital (WACC)?
5. Flotation Costs: Medina Corp. has a debt-equity ratio of .75. The company is considering a new plant that will cost \$125 million to build. When the company issues new equity, it incurs a flotation cost of 10%. The flotation cost on new debt is 4%. What is the initial cost of the plant if the company raises all equity externally?

Submit The summary and all calcluations.

CLICK ORDER NOW TO GET A CUSTOMIZED PAPER ON THIS TOPIC JUST FOR YOU!! 0%PLAGIARISM 100% ORIGINAL PAPER

14 Responses to “Rate of Return for Stocks and Bonds”

1. 763649 499771You got a really great website, Gladiolus I discovered it via yahoo. 993163

2. DevOps says:

314423 403664Register a domain, search for available domains, renew and transfer domains, and select from a wide variety of domain extensions. 646019

3. 바셀티비 says:

244350 938431The vacation special deals offered are believed as a selection of possibly the most preferred and therefore within your budget all more than the globe. Quite numerous hostels can be proudly located inside property which is accented who has striking seashores encouraging crystal-clear rivers, contingency of an Ocean. hotels compare rates 305810

4. 456407 982009Read more on that Post.Useful information. 640634

5. 528618 829281I was reading some of your content material on this web site and I believe this internet web site is actually informative! Keep putting up. 771635

6. 565915 664731This is the sort of info Ive long been in search of. Thanks for posting this details. 851359

7. 781434 286739Awesome blog, Im going to spend a lot more time researching this subject 806881

8. 445080 747590This douche bag loves his illegal bretheren because hes a itiaen of the world and we need to be ashamed of ourselves I got news for you Asswipe get your asswiping ass back to the craphole exactly where you came from with all of your illegal beaners 51081

9. 973053 20043I adore the look of your site. I recently built mine and I was searching for some style suggestions and you gave me a few. May I ask you whether you developed the site by youself? 96066

10. 975624 316239Enjoyed searching at this, really good stuff, thanks . 169224

11. Mai Fiorella says:

October 16.

12. Sau Bacik says:

N-Mosher U0026 Nicat Hashelin is very interesting.

13. 438439 91596very good day, your internet internet site is cheap. I do numerous thanks for succeed 238358

14. 499309 820650Utterly composed topic material , thanks for selective details . 945223