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16) Both Bond Bill and Bond Ted have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 3 years to maturity, whereas Bond Ted has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?11) Valuing Preferred Stock. E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require a return of 8 percent on this stock, how much should you pay today?12) Stock Valuation. Alexander Corp. will pay a dividend of $2.72 next year. The company has stated that it will maintain a constant growth rate of 4.5 percent a year forever. If you want a return of 12 percent, how much will you pay for the stock? What if you want a return of 8 percent? What does this tell you about the relationship between the required return and the stock price?
kanwai fans produces 25000 fans per day at a cost of 7.50 each material and labor. it takes the firm 12 days to convert
Actions that maximize profit may not maximize shareholder wealth. What role can the time value of money play in explaining the discrepancy between maximizing profits and maximizing value?
What is a fair price per share and how many additional shares must Benjamin sell to the angel? Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant.
does a perfect hedge always succeed in locking in the current spot price of an asset for a future transaction? explain
The Joe Corporation is experiencing financial difficulties. Its dividends and earnings are falling at a constant rate of 7 percent per year. Its stock just paid an yearly common stock dividend of $1.50 each share.
evaluate the following statement. managers should not focus on the current stock value because doing so will lead to
The interest rate on new debt is 6.50%, the yield on the preferred is 6.00%, the cost of retained earnings is 11.25%, and the tax rate is 40%. The firm will not be issuing any new stock. What is Quigley's WACC?
Project K costs $55,000, its expected cash inflows are $13,000 per year for 8 years, and its WACC is 7%. What is the project's discounted payback? Round your answer to two decimal places.
What is inventory management primarily concerned with
Keira Mfg. is considering a rights offer. The company has determined that the ex-rights price would be $73. The current price is $85 per share, and there are 60 million shares outstanding. The rights offer would raise a total of $80 million.
Explain mutually exclusive projects and Construct a choice table for interest rates from 0% to 100%
corporations often use different costs of capital for different operating divisions. using an example calculate the
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