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Zheng Enterprises, a multinational drug company specializing in Chinese medicines, issued $100 million of 15 percent coupon rate bonds in January 2000. The bonds had an initial maturity of 30 years. The bonds were sold at par and were callable in five years at 110 (i.e., 110 percent of par value).
It is now January 2005, and interest rates have declined such that bonds of equivalent remaining maturity now sell to yield 11 percent. How much would you be willing to pay for one of these bonds today? Why?
Navel County Choppers Inc. is experiencing rapid growth. The company expects dividends to grow at 17 percent per year for the next 12 years before leveling off at 6 percent into perpetuity. The required return on the company’s stock is 12 percent. If..
Construct a frequency distribution histogram or polygon for the set of scores presented in the following frequency distribution table:
You are working on the valuation for an upcoming IPO. The company that wants to sell its stock expects the following future free cash flows (FCF, in millions of dollars): -6 in year 1, 9 in year 2, 16 in year 3, and cash flows are expected to grow st..
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.9%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: On the basis of these data, what..
The stock price of Baskett Co. is $54.10. Investors require a return of 15 percent on similar stocks. If the company plans to pay a dividend of $3.70 next year, what growth rate is expected for the company’s stock price?
Can Panama issue a bond denominated in dollars at the same terms (that is, at the same yield) as the U.S. government? Why or why not?
Assume a company, correlated with the economy, is evaluating six projects of which two are positively correlated with the economy, two are negatively correlated, and two are not correlated with it as all. Which two projects would it select to minimiz..
You are considering purchasing a new automobile that will cost you $28,000. The dealer offers you 4.9% APR financing for 60 months (with payments made at the end of the month). Assuming you finance the entire $28,000 through the dealer, what is your ..
Last year Kruse Corp had $420,000 of assets, $403,000 of sales, $28,250 of net income, and a debt-to-total-assets ratio of 39%. Sales, costs, and net income would not be affected, and the firm would maintain the same debt ratio (but with less total d..
Suppose a firm is anticipated to have a Net Income per Share of $25 next year and is expected to pay only 20% of (total) Net Income in Dividends. Also, the firm faces an unusually high cost of common stock of 22% and has an unusually low dividend gro..
Why may a bond's price change simply because of the passage of time?.- What is the difference between a bond's current yield and its yield to maturity?
Operating income is not affected by: a. depreciation b. cost of goods sold c. rent payments d. interest earned advantages of the corporation form of business include:
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