User Account

All Pages

What is the dividend yield and capital gains yield today

Assignment Help Finance Basics
Reference no: EM13897890

1. Mega Industries Corporation has eighteen years of a bond outstanding to maturity, an 8.25% nominal coupon, with semiannual payments. The bond has a 6.50% nominal yield to maturity, and can be called at a price of $1,120.

a. What is the bond's nominal yield to maturity when called?

b. What is the bonds effective yield? If inflation rate is at 2.95% what is the real rate of return?

2. Copper Corporation's Class Semi bonds have a twelve-year maturity and an 8.75% coupon paid semiannually and those bonds sell at their par value. The firm's Class A bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable.

a. At what price should the bond sell for?

b. Does this bond sell at a discount or premium and why?

3. Flagship Corporation is looking to raise capital by issuing some 26-year bonds. The yield on the bonds is 7.34 percent. The bonds sell 96.75 percent of par value.

a. What is the current yield on these bonds?

b. What is the effective yield on the bonds?

c. What is the Yield to Maturity? What type of bond is this, discount or premium?

4. Big Corporation just paid a dividend of $1.55 per share. The dividends are expected to grow at 28 percent for the next five years and then 14% for two years then level off to a 6 percent growth rate indefinitely. Market value of stock is 45.80 and purchase price was 24.25.

a. What is the price of this stock today given a required return of 15 percent?

b. What is the stock target price at year 7? If you owned the stock would you sell it? Why?

c. If you are looking to buy the stock would you and why?

d. What would be the dividend yield and capital gains yield at year 7?

5. Highlight Corporation recently paid a dividend of $2.10 per share. The company will increase its dividend by 8 percent over next two years and will then reduce its dividend growth rate by 2 percentage points per year for two years until it reaches the industry average of 2 percent dividend growth, after which the company will keep a constant growth rate forever.

You had bought the stock for $57.30 and its market value is $55.

a. What is the price of this stock today given a required return of 11 percent?

b. What is the stock price at year 4? What is the dividend yield at year 4?

c. Would you recommend buying the stock and why/why not?

d. What is the dividend yield and capital gains yield today.

Reference no: EM13897890

Questions Cloud

What are the effects on the british balance of payments : What are the effects on the British balance of payments of the following set of transactions? U.K. Videos imports £24 million of movies from the U.S. firm Twenty-First Century Wolf (TFCW).
Determine the required rate of return on the security : Determine the required rate of return on the security
What are the effects on the french balance of payments : What are the effects on the French balance of payments of the following set of transactions? Les Fleurs de France, the French subsidiary of a British company, The Flowers of Britain, has just received.
Could east germany developed without running account deficit : Interest rates in Germany were his torically high during this period. Why might that have been the case? Could East Germany have been developed without running a current account deficit? How?
What is the dividend yield and capital gains yield today : What is the dividend yield and capital gains yield today
What are official international reserves of the central bank : What are official international reserves of the central bank? What is likely to happen if a central bank suddenly prints a large amount of new money?
What are the potential benefits of a pegged currency system : What are the potential benefits of a pegged currency system? What is the difference between a target zone and a crawling peg?
Is the robotic surgery investment financially acceptable : Is the robotic surgery investment financially acceptable
What will the government force exporter to do : An exporter has future foreign currency receivables, what will the government force him to do? Second, how does this help the government in defending their exchange rate peg?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financing strategy for renewable energyassume the renewable

financing strategy for renewable energyassume the renewable energy project you studied in week 4 is projected to be

  The existing required reserves ratio

The Friendly National Bank holds $50 million in reserves atits Federal Reserve District Bank. The required reserves ratio is12 percent.

  State laws governing businesses

It can be dry reading and is often a bit difficult to understand, but it is good to be aware of the state laws governing businesses in your state. Go to the Secretary of State website for the state your company is (or is to be) formed.

  Why does cds bond rating and cost of debt depend on the

why does cds bond rating and cost of debt depend on the amount of money

  Calculate the next dividend to be paid and back-out

This is a constant growth stock, and you know the price, the last dividend paid, and the growth rate in the dividend. Simply calculate the next dividend to be paid and back-out the required return (discount rate) on the stock. A) 9.78% B)14.8% C)1..

  Discussion-working with budgets

Budgets are the driving force behind all organizations. Whether a manufacturing organization, or a service organization such as a medical or public accounting firm, budgets are used not only for planning purposes but also for performance monitorin..

  Contemplating the replacement of one of its bottling machine

The Boston Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize..

  What is the coupon rate for super-one bond

Super-One Co. has bonds in the market making annual payment, with 16 years of maturity, and selling for $850. At this price the required rate of return is 8 %. What is the coupon rate for Super-One bond?

  Calculate the uniform annual cost

While the period of analysis is 5 years, the alternative only provides benefits for the last 3 years. Calculate the uniform annual cost.

  What inflation rate is expected after year 1

However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3%. Assume that expectations theory holds and the real risk-free rate is r* = 2.5%.

  Selecting a benchmark company

The National Semiconductor Corporation (NSM) develops and manufactures semiconductors for electronic systems. The firm's products are used in a variety of applications, including LED lighting, high speed communication, renewable energy, and securi..

  Which one of the following sales prices should you use

You would like to test the sensitivity of the project's NPV to the sales quantity. Which one of the following sales prices should you use in your analysis?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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