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You are a Corporate Finance Analyst at Global Motors which is looking to repurchase some of its outstanding debt. The bond issue you are considering has 15 years remaining until its maturity; pays an annual coupon of 6% and has a par value = $1,000. The yield-to-maturity of 15 year US Government Treasury Bonds is 4.5%. Globals Motors is a BBB+ company and the spread of BBB+ credit over 15-year US Gov’t Bonds is 1.25%.
a. What is the appropriate yield-to-maturity or discount rate to value Global Motors’ bond issue?
b. What is the fair market price of the bond?
What is the firm's estimated intrinsic value per share of common stock??
Could there be any “trade wars” emerging from such a strategy?
Trade credit is an important source of working capital. Saftey stock tends to reduce carrying costs.
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According to the Liquidity Preference Model of the Term Structure, if long term bonds become more liquid, then the term structure should become:
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