COST OF CAPITAL

1. XYZ Corp is financed with 60% equity and 40% debt. The cost of equity is 15%, and the
cost of debt is 8%. The corporate tax rate is 25%. Calculate the weighted average cost of
capital (WACC).

2. ABC Inc. has a capital structure consisting of 30% debt, 50% equity, and 20% preferred
stock. The cost of debt is 6%, the cost of equity is 12%, and the cost of preferred stock is 9%.
Calculate the WACC for ABC Inc.

3. A company, LMN Ltd, is considering a new project that will be financed with 50% debt,
40% equity, and 10% preferred stock. The cost of debt is 7%, the cost of equity is 14%, and
the cost of preferred stock is 10%. Calculate the WACC for LMN Ltd.

VALUATION OF STOCK

1. ABC Corp pays an annual dividend of $2 per share, and the dividends are expected to grow
at a constant rate of 5% per year. If the required rate of return is 10%, calculate the intrinsic
value of ABC Corp's stock using the Gordon Growth Model.

2. XYZ Inc. is expected to pay a dividend of $3 per share next year. Dividends are expected
to grow at a rate of 8% per year indefinitely. If the required rate of return is 12%, calculate
the current stock price using the Gordon Growth Model.

3. LMN Co. just paid a dividend of $1.50 per share. Dividends are expected to grow at a rate
of 4% per year. If the required rate of return is 6%, calculate the intrinsic value of LMN Co.'s
stock using the Gordon Growth Model.

4. Company Alpha just paid a dividend of $2 per share. Dividends are expected to grow at a
rate of 8% for the next 3 years and then increase at a constant rate of 4% indefinitely. If the
required rate of return is 12%, calculate the intrinsic value of Alpha's stock using the
Differential Growth Model.

5. Tech Giants Inc. just paid a dividend of $4 per share. Dividends are expected to grow at a
rate of 10% for the next 5 years and then stabilize at a constant rate of 6% per year. If the
required rate of return is 15%, calculate the intrinsic value of Tech Giants Inc.'s stock using
the Differential Growth Model.

6. Fast Cars Co. has a current dividend of $3 per share. Dividends are expected to grow at a
rate of 6% for the next 4 years and then increase at a constant rate of 3% indefinitely. If the
required rate of return is 9%, calculate the intrinsic value of Fast Cars Co.'s stock using the
Differential Growth Model.

7. Company Delta just paid a dividend of $3 per share. If the dividends are expected to
remain constant indefinitely and the required rate of return is 10%, calculate the intrinsic
value of Delta's stock using the Zero Growth Model.
8. Tech Innovators Inc. pays an annual dividend of $4 per share. If the company expects to
maintain this dividend forever and the required rate of return is 8%, calculate the intrinsic
value of Tech Innovators Inc.'s stock using the Zero Growth Model.

9. Fast Cars Co. just paid a dividend of $2.50 per share. If the company plans to keep this
dividend unchanged indefinitely and the required rate of return is 12%, calculate the intrinsic
value of Fast Cars Co.'s stock using the Zero Growth Model.

10. Company XYZ is expected to pay a dividend of $3 per share next year. Dividends are
expected to grow at a constant rate of 6% indefinitely. The company has a beta of 1.2, and the
risk-free rate is 3%. The market risk premium is 7%. If the required rate of return is 10%,
calculate the intrinsic value of XYZ's stock using the Gordon Growth Model and the Capital
Asset Pricing Model (CAPM). Compare the results.

11. ABC Inc. has an earnings per share (EPS) of $3.50, and its stock is currently trading at
$45 per share. Calculate the P/E ratio for ABC Inc. and interpret the result.

12. XYZ Corp. has an enterprise value of $120 million and EBITDA of $30 million.
Calculate the EV/EBITDA multiple for XYZ Corp. and interpret the result.

13. LMN Corporation has an enterprise value of $200 million and EBITDA of $40 million.
Calculate the EV/EBITDA multiple for LMN Corp. and interpret the result.

14. ABC Corp. has a stock price of $80 per share and earnings per share (EPS) of $6.
Calculate the P/E ratio for ABC Corp. and interpret the result.

15. ABC Corporation is a publicly traded company with the following financial information:

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): $25 million

Net Income: $15 million

Total Debt: $50 million

Total Equity: $100 million

Number of Outstanding Shares: 5 million

Calculate the following valuation ratios for ABC Corporation:

Price-to-Earnings (P/E) Ratio

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

Debt-to-Equity Ratio

Earnings per Share (EPS)

16. XYZ Ltd. is a fast-growing technology company. The company's financials for the last
fiscal year are as follows:
Revenue: $150 million

Operating Income: $45 million

Net Income: $30 million

Total Assets: $200 million

Total Liabilities: $60 million

Number of Outstanding Shares: 10 million

Market Price per Share: $25

Calculate the following valuation ratios for XYZ Ltd.:

Price-to-Sales (P/S) Ratio

Return on Assets (ROA)

Return on Equity (ROE)

Price-to-Book (P/B) Ratio

17. XYZ Corporation is a multinational company operating in various industries. The

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): $150 million

Net Income: $60 million

Total Assets: $1.2 billion

Total Liabilities: $400 million

Total Equity: $800 million

Dividends per Share: $3.50

Number of Outstanding Shares: 20 million

Market Price per Share: $50

The company is planning to acquire a competitor to expand its market share. The acquisition
is expected to increase EBITDA by 25%, and the company plans to finance the acquisition
through a mix of debt and equity. The new debt will be $300 million, and the company will
issue additional shares to raise $150 million in equity. The tax rate is 30%. Calculate the
following metrics before and after the acquisition:

Earnings per Share (EPS)

Price-to-Earnings (P/E) Ratio

Debt-to-Equity Ratio

Enterprise Value (EV)

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

BOND VALUATION

1. ABC Corporation issued a 5-year bond with a face value of $1,000 and a coupon rate of
6% paid annually. If the current market interest rate is 8%, calculate the present value of the
bond.

2. XYZ Corporation issued a 10-year bond with a face value of $1,500 and a coupon rate of
7% paid semiannually. If the current market interest rate is 6% compounded semiannually,
calculate the present value of the bond.

3. LMN Corporation issued a zero-coupon bond with a face value of $1,200 and a maturity of
8 years. If the market interest rate is 5%, calculate the present value of the zero-coupon bond.

4. PQR Corporation issued a 7-year bond with a face value of $1,000 and a coupon rate of
8% paid annually. The market interest rate is 6%. Calculate the present value of the bond and
determine if it is trading at a premium, discount, or par.