Finance Problems, Finance Basics

Assignment Help:
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?

Related Discussions:- Finance Problems

Calculate the lump sum, Your daughter is a beginning freshman in high schoo...

Your daughter is a beginning freshman in high school. By the time she enters her freshman year in college, you would like to have savings accumulated to pay her tuition for her nex

Calculate holding period return, 1)       What is the holding period re...

1)       What is the holding period return to an investor who bought 100 shares of Charter Oil nine months ago for $36 a share, received two $50 dividend checks, and sold the s

Comparison between modern and traditional methods, Comparison between Moder...

Comparison between Modern and Traditional Methods Both modern and traditional methods will indicate or show strong weaknesses which like a company cannot use either to choose

Business ethics - objectives of business entity, Business Ethics - Objectiv...

Business Ethics - Objectives of Business Entity Connected to the question of social responsibility is the matter of business ethics.  Ethics are explained as the "standards of

Weighted average cost of capital, Below is information provided for tw...

Below is information provided for two companies, A and B.  Assuming a risk-free rate of 2.5%, an effective tax rate of 40%, and a market risk premium of 5.5%, estimate th

Micro economics, effect of gdp in the domestic market

effect of gdp in the domestic market

Stock split and reverse split, Stock Split and Reverse Split This is w...

Stock Split and Reverse Split This is whereas a block of shares is broken down into smaller units or shares hence the number of ordinary shares rises and their respective par

Objective to transfers of financial assets, Access the relevant authoritati...

Access the relevant authoritative literature on accounting for the transfer of financial assets. What conditions must be met for a transfer of receivables to be accounted for as a

Finance Instrumant and Market , What factors would affect company consider ...

What factors would affect company consider in choosing option for capital-raising

Conditions for lease finance, Conditions for Lease Finance Lease finan...

Conditions for Lease Finance Lease finance is ideal within the following circumstances: a) Whenever the asset depreciates faster. b) Whenever the asset is matter to obso

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd