1. Based on the information below, calculate the weighted average cost of capital. Great Corporation has the following capital situation. Debt: One thousand bonds were issued five years ago at a coupon rate of 8%. They had 25-year terms and $1,000 face values. They are now selling to yield 9%. The tax rate is 39% Preferred stock: Two thousand shares of preferred are outstanding, each of which pays an annual dividend of $7.50. They originally sold to yield 15% of their $50 face value. They\’re now selling to yield 8%. Equity: Great Corp has 133,000 shares of common stock outstanding, currently selling at $12.48 per share. Dividend expected for next year is $.80 and the growth rate is 6%. 2. Holding Period Return Based on the following information calculate the holding period return: P0 = $14.00 P1 = $17.40 D1 = $ .42 3. Future value of single sum problem. You put $1,000 in an investment account today which will earn 7% over the next 20 years, what is the future value? 4. Present value of annuity problem. You will receive $2,000 at the end of the next 12 years, assuming a 6% discount rate, what is the present value of the cash flows?
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