Determine the current stock price

Reference no: EM1359748

1. Assume that a 15-year, $1,000 face value bond pays interest of $37.50 every 3 months. If you require a nominal annual rate of return of 12 percent, with quarterly compounding, how much should you be willing to pay for this bond? (Hint: The PVIFA and PVIF for 3 percent, 60 periods are 27.6748 and 0.1697, respectively.)

a. $821.92
b. $1,207.57
c. $986.43
d. $1,120.71
e. $1,358.24

2. A stock is not expected to pay a dividend over the next four years. Five years from now, the company anticipates that it will establish a dividend of $1.00 per share (i.e., D5 = $1.00). Once the dividend is established, the market expects that the dividend will grow at a constant rate of 5 percent per year forever. The risk-free rate is 5 percent, the company's beta is 1.2, and the market risk premium is 5 percent. The required rate of return on the company's stock is expected to remain constant. What is the current stock price?

a. $7.36
b. $8.62
c. $9.89
d. $10.98
e. $11.53

3. Grateway Inc. has a weighted average cost of capital of 11.5 percent. Its target capital structure is 55 percent equity and 45 percent debt. The company has sufficient retained earnings to fund the equity portion of its capital budget. The before-tax cost of debt is 9 percent, and the company's tax rate is 30 percent. If the expected dividend next period (D1) and current stock price are $5 and $45, respectively, what is the company's growth rate?

a. 2.68%
b. 3.44%
c. 4.64%
d. 6.75%
e. 8.16%

Reference no: EM1359748

Questions Cloud

What is the velocity of the particle : A circuit contains six 205 ohm lamps with 60 W bulbs and a 9 ohm heater connected in parallel. voltage across the circuit is 120 V.what is the current in the circuit when four lamps are turned on.

Explain and prepare a statement of your research : Explain and Prepare a statement of your research question including problem statements (hypotheses) and research objectives

Issues-clinical psychology : What are at least two legal issues associated with clinical psychology? Provide an example of a situation that could be legal but unethical. Explain your response.

Organisational strategy and hr management : What are the necessary conditions for determining a business strategy in an organisation and how can organisations work to include HR issues within a business strategy?

Determine the current stock price : Suppose that a fifteen year, $1,000 face value bond pays interest of $37.50 every 3 months. If you require a nominal annual rate of return of 12%, with quarterly compounding,

What the electrostatic force acts on the proton : what the electrostatic force acts on the proton.

Describe how companies segment international markets : Describe how companies segment international markets and Name and describe the types of consumer products and give an example of each.

Obesity in the workplace : Do you think an overweight employee who chooses not to participate in a wellness program should be penalized?

Organizational integrity : Organizational Integrity - Would organizational integrity make a difference in your loyalty to a company?

User Account

All Pages