Expected for the indefinite future

Assignment Help Finance Basics
Reference no: EM132529088

- You are considering three investments. The first is a bond that is selling in the market at $1 200. The bond has a $1 000 par value, pays interest at 8% and is scheduled to mature in 10 years. For bonds of this risk class you believe that a 9% rate of return should be required.

The second investment that you are analyzing is a preferred stock ($125 par value) that sells for $120 and pays an annual dividend of $18. Your required rate of return for this stock is 16%.

The last investment is a common stock that recently paid a $2 dividend. The firm expects to pay a dividend of $2.18 at year end and this growth in dividends per share is expected for the indefinite future. The stock is selling for $20 and you think a reasonable required rate of return for the stock is 20%.

a. Calculate for each security

i. Expected rate of return

ii. The current value based on your required rate of return

b. Which of the investment(s) should you accept? Why?

Reference no: EM132529088

Questions Cloud

Describe the products and functionality of stock market : Describe the products and the functionality of the stock market. Describe how an individual company can use the bond market to generate funding.
Develop an outline of how the outcomes will be achieved : Method to Achieve Outcomes: Develop an outline of how the outcomes will be achieved. List any specific barriers that will need to be assessed and eliminated.
MOD004168 Global Equity Markets Assignment : MOD004168 Global Equity Markets Assignment Help and Solution, Anglia Ruskin University - Assessment Writing Service - Individual Personal Reflection
Discuss about the contribution of health services manager : Write an essay as a graphic organizer style: about the contribution of the health services manager to an organization and to society.
Expected for the indefinite future : The stock is selling for $20 and you think a reasonable required rate of return for the stock is 20%.
Identify one quality improvement strategy to improve health : Identify one quality improvement strategy to improve health. How could you apply it to your current nursing practice? How does the assimilation of quality.
Create a flexible budget comparing the actual results : Prepare a budget for 2016 assuming sales and variable costs increase by 30% and fixed costs increase by $200,000,Make a flexible budget comparing actual results
Discuss one nursing theory in brief : After your graduation, you will be in an academic or clinical field. Depending on your field choice, discuss one nursing theory and identify the effect that.
Solve the variances for each line item in the budget : Prepare flexible budget comparing the actual results. Calculate the variances for each line item in the budget in both dollar and percentage terms.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd