# Accounting 404 Essay

318 Words2 Pages
Boehm Incorporated is expected to pay a \$1.50 per share dividend at the end of this year (i.e., D1 = \$1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock? Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of \$5 at the end of each year. The preferred sells for \$50 a share. What is the stock’s required rate of return? A company currently pays a dividend of \$2 per share (D0 = \$2). It is estimated that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the risk-free rate is 7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price? LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL’s after-tax cost of debt? Burnwood Tech plans to issue some \$60 par preferred stock with a 6% dividend. A similar stock is selling on the market for \$70. Burnwood must pay flotation costs of 5% of the issue price. What is the cost of the preferred stock? Summerdahl Resort’s common stock is currently trading at \$36 a share. The stock is expected to pay a dividend of \$3.00 a share at the end of the year (D1 = \$3.00), and the dividend is expected to grow at a constant rate of 5% a year. What is its cost of common