Determine the target firm price per share

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Reference no: EM132015404

1. H Corporation has a bond outstanding. It has a coupon rate of 9 percent and a $1000 par value. The bond has 5 years left to maturity but could be called after three years for $1000 plus a call premium of $60. The bond is selling for $1060. The yield to call on this bond is _________

2. Based on the following information, use the market-based relative valuation approach to determine the target firm’s price per share.

The comparable firm:

Total market value of the common stock: $3,500,000

Total earnings: $5,000,000

The target firm:

Total earnings: $3,000,000

Number of shares outstanding: 600,000

a. $3.5

b. $4.0

c. $2.5

d. $3.0

Reference no: EM132015404

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