Calculating The Rate Of Return Of Equity

Calculating The Rate Of Return Of Equity

Instructions/Descriptions

Calculating The Rate Of Return Of Equity

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

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 your summary and all calculations.

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Researcher Analysis On Experiment Using A Software Program

Instructions

This week, you have read about hypothesis testing and will now apply this knowledge by writing a paper that addresses the following:

Provide an example of a hypothesis where a one-tailed hypothesis test would be used.

Provide an example of a hypothesis where a two-tailed hypothesis test would be used.

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If a researcher has set alpha at 0.05 for a two-tailed hypothesis test, what is the p-value required to reject the null hypothesis?

A researcher has set alpha at 0.05. When the researcher analyzes the data from the experiment using a software program, she obtains a p-value equal to 0.932. Based on this p-value, should the researcher reject the null hypothesis or fail to reject the null hypothesis? Please explain your answer.

A researcher has set alpha at 0.01. When the researcher analyzes the data from the experiment using a software program, he obtains a p-value equal to 0.04. Based on this p-value, should the researcher reject the null hypothesis or fail to reject the null hypothesis? Please explain your answer.

A researcher is interested in whether music played during an exam will improve exam performance. Students in one class listen to music during an exam and students in another class take the exam in silence. The researcher set alpha at 0.05. Test scores for both classes are compared using a statistical software program. The mean test score for the class that listened to music during the exam is 95, while the mean test score for the class that took the exam in silence is 82. The obtained p-value from the independent groups t-test is 0.02. Be sure to answer the following questions:

State the null and alternative hypothesis.

Determine if this is a directional or non-directional test. Please explain your answer.

Establish the conclusion of this study based on the p-value and the means provided.

Describe the Type I error for this study.

Describe the Type II error for this study.

Length:1-2 pages

Your paper should demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards.

Calculating The Rate Of Return Of Equity

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