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What is the impact on the estimated stock price

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Reference no: EM131906214

Question 1

A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity of the bond now is 10%.
a) What is the price of the bond today, if it pays no coupons?
b) What is the price of the bond if it pays annual coupons of 10%?
c) What is the price today if pays 8% coupon rate semi-annually?

Question 2

a) What is the value today of a $1000 bond, 8% coupon with annual coupon payments if the time to mature is 2 years and YTM is 4%?

Question 3

SalesTech is a constant growth company whose last dividend (D0, which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate. Find the share price.

Question 4
What is the impact on the estimated stock price if g falls to 5% or rises to 7%? If rs changes to 12%% or to 14%?

Question 5.

XYZCo is reinvesting 70% of its earnings in projects that provide a ROE of 9%.

The expected return on similar risky projects is 14% on the stock market. Given the present policy of the firm its year-end dividend is now $3 per share.

a) At what price will the stock sell?

b) What is the present value of the growth opportunities for XYZ Co?

Verified Expert

The assignment relates to financials management. The concept of bond face value, ytm, etc are used in order to calculate the bond price. The question has been elaborated with clear calculations.

Reference no: EM131906214

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