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What is the company stock required return

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Field Industries' outstanding bond has a 15- year maturity and $1,000 par value. Its nominal yield to maturity (YTM) is 5.19%, it pays interest semiannually, and it currently sells at a price of $1,100.

a) What is the bond's nominal (annual) coupon interest rate?

b) This bond is also callable in 5 years at a price of $1,050. What is the bond's yield to call (YTC)?

A stock is not expected to pay a dividend over the next four years. Five years from now, the company anticipates that it will establish a dividend of $1.00 per share (i.e., D5= $1.00). Once the dividend is established, the market expects that the dividend will grow at a constant rate of 5 percent per year forever. The risk free rate is 5 percent, the company's beta is 1.2, and the stock market's average required rate of return is 10%. The required rate of return on the company's stock is expected to remain constant.

a) What is the company's stock's required return?

b) What is the company's stock's horizon (terminal) value?

c) What is the current company's stock price?

Reference no: EM132828571

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