The expected return on the market is 12.49%, the risk-free rate is 4.47%, and the tax rate is 16.00%. Semper Fun Sports has 300,000 common shares outstanding that are priced at $42.80 per share and have an expected return of 17.30% and an expected real return of 14.21%. Last year, Semper Fun Sports common stock had a return of 11.49% The company also has 400,000 shares of preferred stock outstanding that are priced at $15.48 per share and have an expected return of 13.05% and an expected real return of 11.79%. Last year, Semper Fun Sports preferred stock had a return of 8.17%. Finally, the company has 10,000 bonds outstanding with a coupon rate of 9.45%, yield-to-maturity of 4.66%, current yield of 8,059, face value of $1,000.00, and price of $1,160.00. What is the weighted average cost of capital for Semper Fun Sports? O 11.65% (plus or minus 0.02 percent) 12.45% (plus or minus 0.02 percent) 11.37% (plus or minus 0.02 percent) 9.82% (plus or minus 0.02 percent)
None of the above
QUESTION 2
South Carolina Technology has a weighted average cost of capital of 8.65 percent and is evaluating two projects: A and B. Project A involves an initial investment of $35,700.00 and an expected cash flow of 564,300.00 in 4 years. Project Als considered more risky than an average-risk project at South Carolina Technology, such that the appropriate discount rate for it is 5.52 percentage points different than the discount rate used for an average risk project at South Carolina Technology. The internal rate of return for project Ais 10,67 percent. Project B involves an Initial investment of $71,400.00 and an expected cash flow of 5119,600.00 in 5 years. Project B is considered less risky than an average risk project at South Carolina Technology, such that the appropriate discount rate for it is 1.87 percentage points different than the discount rate used for an average-risk project at South Carolina Technology. The internal rate of return for project Bis 9.35 percent. What is X if X equals the NPV of project A plus the NPV of project B2 512259.60 (plus or minus 510) $22273.73 (plus or minus 510) $16899.74 (plus or minus 510)
$18033.43 (plus or minus $10)
None of the above is within $10 of the correct answer
