Finance Problems, Finance Basics

1.) Assume a $1000 face value bond has a coupon rate of 8.5 percent, pays interest semi-annually, and has an eight-year life. If investors are willing to accept a 10.25 percent rate of return on bonds of similar quality, what is the present value or worth of this bond?
2.) The Garcia Company’s bonds have a face value of $1000, will mature in ten years, and carry a coupon rate of 16 percent. Assume interest rates are made semi-annually.
A.) Determine the present value of the bonds cash flows if the required rate of return is 16.64 percent.
B.) How would your answer change if the required rate of return is 12.36 percent?
3.) Mercier Corporations stock is selling for $95. It has just paid a dividend of $5 a share. The expected growth rate in dividends is 8 percent.
A.) What is the required rate of return on this stock?
B.) Using your answer to (a), suppose Mercier announces developments occur that should lead to dividend increases of 10 percent annually. What will be the value of Mercier’s stock?
C.) Again using your answer to (a), suppose developments occur that leave investors expecting that dividends will not change from their current levels in the foreseeable future. Now what will be the value of Mercier stock?
D.) From your answers to (b) and (c), how important are investors expectation of future dividend growth to the current stock price?
Posted Date: 2/22/2013 9:58:29 PM | Location :







Related Discussions:- Finance Problems, Assignment Help, Ask Question on Finance Problems, Get Answer, Expert's Help, Finance Problems Discussions

Write discussion on Finance Problems
Your posts are moderated
Related Questions
Earnings Yield Valuation EY is given via the earnings made with the business expressed like a percentage of the market price of the business that is The Formula For Earning

Discuss capital budgeting techniques including : the Payback Rule, IRR, NPV, and the Profitability Index. Be sure to discuss the advantages and disadvantages of each one.  Di

sir could you please tel me what is A/R process.

a debt off Rs1000 with interest at 10% compounded quarterly will be repaid by payments Rs. 200 at the end of 3 months and three equal payments at the end of 6 9 and 12 months. find

The Balance Sheet of International Trade Ltd. as on 31/3/2008 is as under:-                                  Liabilities Amount Assets

Foreign Credit Insurance Association (FCIA) An agent of the Export/Import Bank, FCIA gives exporters with insurance coverage beside both commercial and political risk. The main

how i can get enough money with out doing any works ????????????

The Beta of several industry sectors is shown below. Industry                                                                                            Beta (β) Banks

Functions of Central Bank a) Ensure Economic stability b) Lender to the government c) Printing of currency notes d) Banker to the government e) Lender of last reso

Some of the policies decided by the proprietor are: 1) Time of operating the business 2) Promotion through advertising or special offers 3) Dealing with suppliers and cus