Reference no: EM133014456

Questions -

Q1. Feather Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 15 % a year for the next 4 years and then decreasing the growth rate to 3.5 percent per year. The company just paid its annual dividend in the amount of $0.20 per share. What is the current value of one share of this stock if the required rate of return is 15.5 %?

Q2. Clean It, Inc., is preparing to pay its first dividend. It is going to pay $0.45, $0.60, and $1 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type?

Q3. The bonds issued by Steels Co. bear a 6 % coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 par value. Currently, the market price of the bond is $989, if your required rate of return is 9%. Calculate the bond expected rate of return. Your fair value of the bond considering your required rate of return. Is the bond a good investment for you?

Q4. Grumpy Industrial Products' is considering purchasing a bond that matures in 16 years, the bond has a 7.60 % coupon that pays interest annually. The face value is $1,000 and the current market price is $1,062.50. Grumpy industrials have a required rate of return of 8%. What is the bond's expected rate of return? Should Grumpy industrials purchase the bond (explain your answer)?

Q5. Willy Supply offers 7.5 % coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?

Q6. Roadside Markets has a 75 % coupon bond outstanding that matures in 10.5 years. The bond pays interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 6.69 %?