Week 2 Corporate Financial Essay

1 . (Bond valuation) Michael Motors' bonds have 10 years outstanding to maturity. Interest is usually paid each year, the bonds have a $1000 par value and the coupon interest rate is almost eight percent. The bonds have a yield to maturity of being unfaithful percent. What is the current market price of these bonds?

Income = 8% of 1, 1000 = 85 YTM or interest rate

in = 10 i = 9(%) PMT = eighty FV = 1000 PHOTOVOLTAIC = solve

PV=935. 82

2 . (Valuation a desired stock) Susie's Pet Items issued preferred stock which has a state dividend of 10 % at doble. Preferred stock of this type currently brings 8 percent an the par benefit is $22.99. Assume payouts are paid out annually. a) What is the significance of Susie's recommended stock?

b) Assume interest rate levels rise until the preferred inventory now yields 12 percent. What would be the value of Susie's desired stock?

a few. (Constant progress model) You are thinking about an investment inside the common stock of Az Jake's Company. The stock is expected to pay a dividend of $2 a share towards the end of the season (D1 = $2. 00) The share has a beta equal to 0. 9. The risk free level is a few. 6 percent and the market premium is definitely 6 percent. The stock's dividend is definitely expected to expand at some continuous rate g. The share currently markets for $25 a discuss. Assuming the industry is in equilibrium, what does the industry believe would be the stock value at the end of three years? (That is, what is P3? )

some. (Bond valuation) Eagle Projects has a connect issue spectacular with a coupon price of 7 percent and some years outstanding until maturity. The par value with the bond is definitely $1, 000. (a) Determine the current benefit of the bond if present market circumstances justify a 14 percent required rate of returning. Assume the bond pays interest annually. (b) Using the information previously mentioned, what need to be the current worth if the relationship had a semi-annual coupon rather than an annual coupon? (c) Assume an annual voucher but twenty years remaining to maturity. Precisely what is the current benefit under these...

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