Investment based on your required rate of return

Assignment Help Financial Accounting
Reference no: EM133272869

You have finally saved $10,00 and are ready to make your first investment. You have the following three options for investing that money:

Option 1: Rio Tinto Ltd BONDS, with a face value $1000 and coupon interest rate of 9%, are selling for $1314 and mature in 12 years.

Option 2: Southwest Bancorp preference share are paying a dividend $3.50 and selling for $25.50. Option 3: Harvey Norman ordinary shares are selling for $37. The shares recently paid a $1.32 dividend and the firm's earnings per share have increased from $1.49 to $3.06 in the past 5 years. The firm expects to grow at the sane rate for the foreseeable future.

You required rate of return for these investments are 6% for the bond, 7% for the preference shares and 15% for the ordinary shares. Using the information provided, answer the following questions:

1. Calculate the value of each investment based on your required rate of return?

2. Which invest would you select and why?

Reference no: EM133272869

Questions Cloud

Treasurers and controllers : You can select, 'Treasurers and Controllers'. The resulting site will provide information about tasks, technology skills, tools used by people in profession.
Making sound business decisions : What would your process be to ensure that all related financial details are allocated for and tracked so as to assist in making sound business decisions?
Capital acquired by business : Capital acquired by a business with the understanding that the capital will have to be repaid by the business, usually within a defined time period
Understand consequences of borrowing : College students and young people generally get themselves into credit problems because they do not fully understand the consequences of borrowing
Investment based on your required rate of return : Calculate the value of each investment based on your required rate of return?
About technological improvement : What could bring about a technological improvement in your production function and those of your fellow students?
Excessive level of debt on balance sheet : The company is facing significant financial issues due to the excessive level of debt on the balance sheet.
Federal level regarding tax-exempt status : How much in community benefits does state of Texas require we provide? What is going on at federal level regarding tax-exempt status for healthcare organization
Major types of inventory on balance sheet : The three major types of inventory on the Balance Sheet of a Manufacturing Company

Reviews

Write a Review

Financial Accounting Questions & Answers

  Self-employment income and taxpayer prefer

Pat generated self-employment income in 2016 of $76,000. The self-employment tax is: The taxpayer’s marginal tax bracket is 25%. Which would the taxpayer prefer?

  What is its intrinsic value

After that from the 3rd year, its growth rate will be constant at 2%. The current required rate of return is 13%. What is its intrinsic value

  What is the amount of depreciation expense

Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 20X1

  Complete the income statement and retained earnings

After analyzing the data, complete the income statement and retained earnings statement below for the year ending December 31, 2011.

  State what type of error is

Prepare an extract from the company's income statement for the year 2019 stating comparative figures for 2018. State what type of error is

  What is contribution margin per unit for each chocolate bar

What is the contribution margin per unit for each chocolate bar produced given the fact pattern above? What is the Swiss Chocolate's U.S. division breakeven point in units and dollars given the fact pattern above?

  What is the bond straight-debt value

Neuman Corporation Convertible Bonds, Refer to the data for the Neuman Corporation's convertible bonds. What is the bond's straight-debt value?

  What recommended organizational changes will help to boost

What recommended organizational changes will help to boost employee job motivation in the workforce? Assess potential conflicts that may arise

  What the proper treatment of the decision is

What the proper treatment of the decision is? In regard to employee benefits, on October 20, 2X13, the CFO of Scare Crow PLC in London.

  Determine the interest rate earned

Question - Determine the interest rate earned on a $2,250 deposit when $2,550 is paid back in one year

  How to find the present vale of the stream of cash flows

How to Find the present vale of the stream of cash flows assuming that the firm's cost is 14% and that these amounts are received at the end of each year.

  How much is the depreciation for the year

Residual value was estimated at $8,000. The machine is being depreciated over eight years. How much is the depreciation for the year

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