Calculate the price of the preferred stock

Assignment Help Financial Accounting
Reference no: EM132512133

Suppose the financial manager of Vitol suggests either issuing bonds or shares to raise capital for the environmental-friendly development plan. Assuming there is no fees or costs for the securities.

Question (i) Suppose Vitol plans to issue bonds with $10,000 par value, 20 years of term to maturity, 12% coupon to be paid semi-annually, investors require 6% of return on the bond with similar risk. Calculate the price of the bonds.

Question (ii) Suppose Vitol's preferred stock is expected to pay a $1 dividend every year and the required return is 9%. Calculate the price of the preferred stock.

Question (iii) Suppose Vitol just paid a dividend of $0.5 a share. It is expected its dividend to be grown by 4% per year. If the market requires a return of 12%, calculate the fair value of the stock.

Question (iv) Why the require returns in the part (i) through (iii) are different even though the issuer is the same?

Reference no: EM132512133

Questions Cloud

Same standard of living in seattle : In order to have the same standard of living in Seattle, you would need to earn how much money? (Note: Round this to the nearest dollar.)
Modern public corporation : What are its distinguishing characteristics? How is the "modern public corporation" different from older forms of corporations?
Motivation affect thomas level of managerial hubris : The 1920 Farrow's Bank failure: case of managerial hubris. How did corporate culture, leadership, power-motivation affect Thomas' level of managerial hubris?
Describe characteristics of fiscal policy in great recession : Describe the characteristics of fiscal policy in the Great Recession.
Calculate the price of the preferred stock : Suppose Vitol's preferred stock is expected to pay a $1 dividend every year and the required return is 9%. Calculate the price of the preferred stock.
HRM207 Compensation Assignment : HRM207 Compensation Assignment Help and Solution - Emirates College of Technology, UAE - Assessment Writing Service
Provide journal entries necessary to account for transaction : Provide the journal entries necessary to account for the above transactions and events. RCK Ltd issues a prospectus inviting the public to subscribe
Expansionary fiscal policy : In the AD-AS model, an expansionary fiscal policy may lead to a rightward shift of aggregate demand and demand-pull inflation
Describe which forecasting methods would be applicable : Identify at least one metric to measure the process. Describe which forecasting methods would be applicable.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Estimate the new products future sales

Estimate the new product's future sales, profits and cash flows throughout its five year life cycle. Should Utopia Software introduce the new product?

  The balance in the unearned fees account

The balance in the unearned fees account, before adjustment at the end of the year, is $275,000. What is the adjustment if the amount of unearned fees at the end of the year is $165,000? Indicate each account affected weather the account id increased..

  Effect of the transaction or adjustment on assets

Transaction analysis-various accounts LO 6, 8, 9 For each of the following transactions or adjustments, indicate the effect of the transaction or adjustment on assets, liabilities, and net income by entering for each account affected the account name..

  Create the journal entry to record income taxes

Taxable income was $20,000; Johnny had $93,000 of pretax accounting income. The tax rate is 35%. Prepare the journal entry to record income taxes for 2018.

  Raw materials budget with cash disbursement

Morganton Company makes one product and it provided the following information to help prepare the master budget for its first four months of operation: Prepare the following budgets for July and August: Sales budget with cash collections. Production ..

  Decrease in proportion to the additional room sales

On the twentieth day of the month, room sales at the Motor Lodge Motel exceeded its breakeven point for the month. Revenue generated by room sales during the remaining days of the month will: decrease in proportion to the additional room sales.

  Failure to record accrued interest on notes payable

Failure to record accrued interest on notes payable in 2012; that amount was recorded when paid in 2013. (5) Failure to record amortization of patent in 2013.

  What does the scanlon plan mean need examples

What does the scanlon plan mean? need examples to explain it.

  Calculate EAR for Royal Grandora Bank and First United Bank

Calculate the EAR for Royal Grandora Bank and First United Bank. (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

  Differences between the beginning and ending balances

Prepare a financial statement that explain the differences between the beginning and ending balances for the accounts in the Stockholders' Equity category of the balance sheet.

  Comparison of variable costing and absorption

comparison of variable costing and absorption costingconsider the following information pertaining to a years

  Defined benefit pension plan experienced

City of Dallas Police and Fireman Defined Benefit Pension Plan experienced a difference between its expected Projected Benefit Obligation and its actual Projected Benefit Obligation during the calendar year 2015. The actuary notified City of Dallas P..

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!

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