Reference no: EM132839415

Questions -

Q1. Imagine investing in a current bond with an annual coupon of 6% and a remaining maturity of 10 years. The bond has a face value of $900 and a market interest rate of 8%. Determine the payment you should make for the bonus.

Q2. Mobile Motors Inc. bonuses are 12 years away from maturity. Interest is paid annually, has a face value of $2,000, the coupon interest rate is 7% and 11% yield at maturity. Determines the current price of the bond in the market.

Q3. Cassidy Industries' current bonds have a face value of $800, a six-monthly coupon of 8%, 12 years at maturity and a YTM of 10%. Determines the price of the bonus.

Q4. Suppose a bond has a face value of $3,000, 10 years at maturity, an annual coupon of 7% and sells for $2,800. Calculates yield at maturity (YTM). Calculates the price within 4 years, assuming that the yield at maturity remains constant.

Q5. Suppose Roberto is considering a 12-year bond with a face value of $2,000 and an 8% fee payable on a six-monthly basis. Calculates the payment Roberto should make if an "effective" annual interest rate of 8.2% is required.

Q6. River Industries paid $2.00 dividends per share. The dividend is expected to increase 10% annually over the next 4 years and 6% in the remaining years. Calculates the expected dividend per share for each of the 6 years.

Q7. Corner Company is estimated to generate $18 million in cash flow available during the first year, and is expected to grow at a 5% current rate per year. The company has no debts or preferred shares and its weighted average cost of capital (WACC) is 9%. It calculates the value per share, considering that the company has $32 million in current shares.

Q8. Calculates the nominal rate of return for a perpetual preferred stock with a face value of $200, a dividend of 9% of face value, and a current market price of $100.

Q9. Rome Corporation invests in the R&D department and will not pay dividends for years to come. Venetian Industries is interested in acquiring shares in Rome Corporation. The CEO of Venetian has estimated Rome's available cash flows for the next 3 years: $7 million, $9 million and $12 million. After the third year, the available cash flow is expected to grow 5% consistently. Rome Corporation's weighted average capital cost (WACC) is 7%, the market value of your debt and preferred shares total $60 million. Rome Corporation has $22 million of non-operating assets and 9 million common shares outstanding.

a. Calculates the present value of expected available cash flows for the next 3 years.

b. Determines the market value of Rome Corporation's operations.

c. Calculates an estimate of Rome Corporation's price per share.