In 2015, Caterpillar Inc.

September 11, 2019/in Questions Uploads /by Hannah Wangui

Question

In 2015, Caterpillar Inc. had about 653 million shares outstanding. Their book value was $32.3 per share, and the

market price was $74.00 per share. The company’s balance sheet shows that the company had $20.20 billion of long-term debt, which was currently selling near par value.

a. What was Caterpillar’s book debt-to-value ratio? (Do not round intermediate calculations)

b. What was its market debt-to-value ratio? (Do not round intermediate calculations)

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Shelton Inc has the following capital structure

September 11, 2019/in Questions Uploads /by Hannah Wangui

Question

Shelton Inc has the following capital structure. Its corporate tax rate is 40%. Security Market

Value Required Rate of Return

Debt $10million 2%Preferred

stock 20million 4 Common

stock 50million 8

What is its WACC?

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rate of return

September 11, 2019/in Questions Uploads /by Hannah Wangui

Question

he risk-free rate is 6% and the expected rate of return on the market portfolio is

13%.

a. Calculate the required rate of return on a security with a beta of 1.15. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If the security is expected to return 16%, is it overpriced or underpriced?

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A stock is selling today for $75 per share

September 11, 2019/in Questions Uploads /by Hannah Wangui

Question

A stock is selling today for $75 per share. At the end of the year, it pays a

dividend of $3 per share and sells for $84.

a. What are the dividend yield and percentage capital gain? (Enter your answers as a whole percent.)

b. Now suppose the year-end stock price after the dividend is paid is $69. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.)