13.25 WACC for a firm: The Imaginary Products Co. currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semiannual pay) have a maturity of 15 years and are currently priced at $1,440.03 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00. The preferred shares offer an annual dividend of $1.20. Imaginary also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Imaginary is subject to a 40 percent marginal tax rate, then what is the firm’s weighted average cost of capital? Capital componentNumber outstandingCurrent price Bonds300,000 $1,440.03 Preffered stock2,000,000 $12.00 Common stock14,000,000 $20.00 Coupon rate on debt9% Coupon frequency (per year)2 Bond maturity (years)15 Preferred dividend (annual)$1.20 Expected dividend on common (D1)$2.20 Constant annual dividend growth rate (forever)5% Marginal tax rate40% Capital componentMarket ValueWeightAfter-tax costWeighted Cost (%) Bonds Preferred stock Common stock Total capital (market value) WACC

 

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13. Energy spectral density defines
a) Signal energy per unit area
b) Signal energy per unit bandwidth
c) Signal power per unit area
d) Signal power per unit bandwidth
14. Power spectrum describes distribution of _________ under frequency domain.
a) Mean
b) Variance
c) Gaussian
d) None of the mentioned
15. How can power spectral density of non periodic signal be calculated?
a) By integrating
b) By truncating
c) By converting to periodic
d) None of the mentioned

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13. Inoculation programs against certain diseases such as small pox, polio, and whooping cough create

public goods.

positive externalities in consumption.

nonrival goods.

nonexcludable goods.

external costs to society equal to the costs of the program.

 

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13. On January 3, 2011, Haskins Corporation acquired 40 percent of the outstanding common stock of
Clem Company for $990,000. This acquisition gave Haskins the ability to exercise significant influence
over the investee. The book value of the acquired shares was $790,000. Any excess cost over
the underlying book value was assigned to a patent that was undervalued on Clem’s balance sheet.
This patent has a remaining useful life of 10 years. For the year ended December 31, 2011, Clem
reported net income of $260,000 and paid cash dividends of $80,000. At December 31, 2011, what
should Haskins report as its investment in Clem under the equity method?

 

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