Give typing answer with explanation and conclusion Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a constant rate of 3.5% indefinitely. Today'smarket price/share is $15.50. Suppose also that your company has some bonds outstanding in the market selling for $896.85. The bondshave 12 years left to maturity, with 10% coupon rate with semi-annual payments and $1000 par value. If your company's capital structure is35% debt and 65% equity, with the tax rate of 40% what is the WACC?8.15%9.92%6.49%9.08%7.65%

WACC stands for weighted average cost of capital.It is the blended cost of capital considering all…

Answered: Suppose that your company just paid a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

You want to find the value of a corporate bond with an annual coupon rate of 6%, making semi-annual coupon payments for 7 years, after which the bond matures, and the principal must be repaid. Assume a current YTM of 7%. (round to the nearest cent){DO INCLUDE COMMAS OR $}
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
You purchased a 5-year corporate bond 2 year ago. Its coupon interest rate was 8% with interest paid annually, and its par value was $1,000. The market price was $750 based on the expectation that you may on average receive 70% of the par value. The yield curve was perfectly flat in which the market interest rate remained the same as the expected YTM until now. Assume that the reinvestment can be made at the market interest rate. Today, due to a negative shock by a global pandemic accompanied by a bailout monetary policy, investors now expect to receive 30% of the par value and the market interest rate for the following three years has declined by 1%. What is the holding period return of this bond over the past two years if you close the position now?
1) A firm’s stock is selling for $134. They just paid a $4 dividend and dividends are expected to grow at 8% per year. .1. What is the required return? .2. What is the dividend yield? .3. What is the capital gains yield? 2) Explain the relationship between bond price and years remaining the maturity 3) Suppose a bond with a 14% coupon rate and semiannual coupons with 12% YTM and has a face value of $1000, 10 years to maturity. What is the price of the bond? Is this a premium or discount bond?
I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market for $960.45. These bonds carry a 9 percent coupon paid semiannually, and have 15 years remaining to maturity. What is the capital gain yield assuming that the interest rates will remain constant over the year?
Assume that all participants in the following have an interest rate or discount rate of 10%. A firm could either finance an operation by selling 1% of a constant stream of income of $50 million per year forever (an equity exchange) or by selling a 5 year bond with a 15% coupon rate and a face value of $3 million.a. What is the present value of the equity?b. What is the present value of the bond?
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 12 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 10.4 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $6.2-per-share annual dividend forever? c. A company is planning to set aside money to repay $168 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT c2.PMT million 8.55 million
Assume you expect a company’s net income to remain stable at $3500 for all future years, and you expect all earnings to be distributed to stockholders at the end of each year, so that common equity also remains stable for all future years (this also assumes a clean surplus). Also, assume the company’s β = 1.3, the market risk premium is 5% and the 10-year yield on risk-free government bonds is 5%. Finally, assume the company has 1300 ordinary shares outstanding. Required: a) Use the CAPM to estimate the company’s equity cost of capital. b) Compute the expected net distributions to stockholders (dividends) for each future year.
Kaiser Industries has bonds on the market making annual payments, with 14 years to maturity, a par value of $1,000, and a current price of $1,108.60. At this price, the bonds yield 7.5 percent. What is the coupon rate? Is there a way to set this up in Excel? Please show your work- I'm trying to understand the process. Thank you.
Cardi is thinking of investing in a zero-coupon bond that sells for $250. At maturity in 16 years, it will be redeemed for $1,000. What approximate annual rate of growth does this represent? a. 8% b. 9% c. 12% d. 25%
A) A bank invests $15 million in a coupon bond. The coupon bond pays a coupon of 4% per year, paid semi-annually and has 2 years to maturity. If the current yield-to-maturity is 3.5% semi-annually, what is the price of the bond? B) Recalculate the price of the bond if, a year later, the yield-to-maturity surged by 300 basis points C) What is the holding period return recorded on the bond position over the past year?
Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000.a. Suppose that 1 year later the going market interest rate drops to 6%. What is thenew price of the bonds, assuming they now have 19 years to maturity? b. Suppose that 1 year after issue, the going market interest rate is 10% (rather than6%). What would the price have been?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS