Reference no: EM133115820
1. CMS Corporation's balance sheet as of today is as follows:
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Long-term debt (bonds, at par)
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$10,000,000
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Preferred stock
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2,000,000
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Common stock ($10 par)
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10,000,000
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Retained earnings
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4,000,000
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Total debt and equity
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$26,000,000
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The bonds have a 5.3% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
2. 5-year Treasury bonds yield 3.7%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%. What is the real risk-free rate, r*?
3. $10.50 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?
4. Orwell building supplies' last dividend was $1.75. Its dividend growth rate is expected to be constant at 50.00% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (rs) is 12%. What is the best estimate of the current stock price?