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
Ask questioAustralian’s Speleological App Projectn #Minimum 100 words accepted#

Comparison between Debt Finance and Ordinary Share Capital Differences between Debt Finance and Ordinary Share Capital as Equity Finance as   Ordina

on may 1, counts, inc has a balance of $1000 in office supplie. during may the company buys $500 more of the office supplies. on may 31 the company counts the supplies and finds 20

Stock Market Index Definition of Stock Market Index An index is a numerical figure that measures relative change in variables between two type of durations. Examples

what are the difference between receipt and payment account and income and expenditure account ?

evaluate the source of finance for a business project

Importance and Solution of Dividend Decisions Dividends decisions are integral part of a firm's strategic financing decision. It is hence a plan of action adopted by managemen

Imagine Joy is the manager of a bank named Money Talks Bank of Virginia . This bank has recently issued new loans to customers. Joy wants you, the business analyst to prepare a re

Food and Beverages Rooms, Restaurants and Other Services Other Income Total $ $ $ Sale

Company XYZ stock is considering the two new projects, Project A and Project B. The two projects have similar risk characteristics as the existing business. The managers forecast t