What interest payments do bondholders receive each year

Assignment Help Financial Management

Reference no: EM13870644

1. Common Products has issued its $.0001 par value stock in two separate financing transactions. Transaction 1: five years ago, the founder of the company purchased 4,000,000 shares of stock for $100,000. Transaction 2: last year the company went public by issuing 20,000,000 shares of stock to the public for $32 million. Use this information to fill in the following table:

Common shares (par value) ____________________

Additional paid-in capital ____________________

Retained Earnings ____________________

Net Equity $40,000,000

2. A $1,000 face value bond of Acme Inc. pays an annual coupon and carries a coupon rate of 4.75%. It is was a 30 year bond when issued and it has 11 years remaining to maturity. If it currently has a yield to maturity of 5.5%.

(a) What interest payments do bondholders receive each year?

(b) What is the current bond price?

3. A 10 year maturity bond with a coupon rate of 6.25% and face value of $1,000 makes semi-annual coupon payments. What is the bond’s yield to maturity if the bond is selling for:

(a) 900?

(b) 1,000?

4. Large Industries annual bonds are selling at 102 (i.e., the price is $1,020 for the $1,000 bond). There are 7 years remaining until maturity on the bonds and the yield to maturity is 5.25%. Find the coupon rate. (Note: you may have to use a trial and error solution method)

5. Below are the data for two stocks, both of which have a discount rate of 10 percent: Stock A Stock B Return on equity 11% 12% Earnings per share $2.20 $.90 Dividends per share $ .95 $.50

a. What are the dividend payout ratios for each firm?

b. What are the expected dividend growth rates for each firm?

c. What is the estimated stock price for each firm?

d. Which stock has the higher market value of equity?

6. You have forecast that United Sports, Inc. will pay a dividend of $1.60 next year (in time 1), $2.00 two years from now (in time 2) and $2.20 three years from now (in time 3). For dividends beyond three years, you assume they will increase at 5% per year from the prior year. If the discount rate is 9%, calculate a fair price for the stock of United Sports, Inc.

Reference no: EM13870644

Questions Cloud

What is the fair market value of arthurs toys stock : Arthur’s toys paid a dividend of $3.00 recently. Company projections made by Arthur estimate the dividend will remain at that level for years 1 and 2. Following this, the dividend is supposed to grow at a 10% rate for years 3 and 4. Finally, the divi..

Sustainable and internal growth rates : Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 2.00; profit margin = 7%; payout ratio = 30%; equity/assets = .60. (Do not round intermediate calculations. Enter your answers as a percent rounded ..

Find k if her annual effective investment yield : Common stock X pays a dividend of $100 at the end of the first year, with each subsequent annual dividend being $10 more than the preceding one. Alice purchases the stock at a theoretical price to earn an expected annual effective yield of 10%. Immed..

What is the cash flow from disposal : Reversing Rapid Co. Purchases an asset for $183552. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a..

What interest payments do bondholders receive each year : Common Products has issued its $.0001 par value stock in two separate financing transactions. Transaction 1: five years ago, the founder of the company purchased 4,000,000 shares of stock for $100,000. If it currently has a yield to maturity of 5.5%..

Interbank lending and borrowing rates exist : You expect that the INR will depreciate against the dollar from its spot rate of $.0.15 to $.0.125 in 60 days. The following interbank lending and borrowing rates exist: How can you profit from the above given information. Estimate the profits that c..

Calculate tax paid on gain on disposal : Genetic Insights Co. purchases an asset for $15,116. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..

Determine the total dollar amount of your profit or loss : One year ago, you sold a put option on 100,000 euros with an expiration date of one year. You received a premium on the put option of $.04 per unit. The exercise price was $1.22. Determine the total dollar amount of your profit or loss from your posi..

User Account

All Pages