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1. The bonds XYZ, Inc pay an annual coupon rate of 10% and have 12 year maturity. If investors required rate of return is now 8% on these bonds a) Will the bonds be selling at a premium or a discount with respect to $1,000 face value? Why? b) What is the fair price of the bonds?
2. Admiral Thrawn Inc. plans to issue a $1,000 par value, 10-year noncallable bonds with a 4% annual coupon. The company's current tax rate is 56%, but Congress is considering a change in the corporate tax rate to 22%. By how much would the component cost of debt used to calculate the WACC change (in percent) if the new tax rate was adopted?
URN Inc. recently paid a $5.00 annual dividend. The dividend is expected to grow at a 4% rate. At a current stock price of $52, what is the return shareholders are expecting? Expected Return Market value of Assets = Market value of Net Fixed Assets +..
CD Bargain Barn is forecasting earnings per share of $3.35 next year. what is the present value of growth opportunities (PVGO)?
Situational Software Co. (SSC) is trying to establish its optimal capital structure.
A call option on Jupiter Motors stock with an exercise price of $65 and one-year expiration is selling at $4. what should the stock price be?
According to the MM view of corporate taxes, what is the value of the levered firm in millions of dollars if the company’s tax rate is 25 percent?
There is evidence that small stocks and value stocks perform better over the long term than the market averages. What are some logical reasons for this phenomenon?
Calculate the project cash flows for the first 4 years of this business.
Contrast the concepts of systematic risk and firm-specific risk, and give an example of each type of risk;
Assume annual coupon payments. What is the current value of this bond?
You will buy a common stock that will pay $0.50 dividend next year and the dividend will grow at an annual rate of 5%. The dividend payments are expected to go on indefinitely. If your required rate on this common stock is 10%, how much are you willi..
ABC would like to expand and have a capital structure of. Calculate the weighted average cost of capital.
The Felix Corp. will pay an annual dividend of $1.00 next year. The dividend will increase by 12 percent a year for the following two years before growing at 4 percent indefinitely thereafter. If the required rate of return is 10 percent, what is the..
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