What is the coupon payment of the bond

Assignment Help Accounting Basics

Reference no: EM132554601

Business Finance :

Question 1: a. Middleton expects to buy a 9.5% coupon, 15 years bond today, when it is first issued by Alex PLC. If interest rates suddenly rise to 12.5%, what happens to the value of Middleton's bond? Why? (Word limit 20 - 30 words)
b. A corporate bond has a face value of $1 000, a coupon rate of interest of 10.5% per annum, payable semi-annually, and 20 years remaining to maturity. The market interest rate for bonds of similar risk and maturity is currently 8.5% per annum.

Required:
i. What is the coupon payment of the bond?
ii. What is the present value of the bond?
iii. If the coupon payment is payable annual (based on the same information), what is the value of the bond?

Question 2:
a. Briefly discuss the relationship between the following: (Word limit 50-70 words)
i. Share price and investors required rate of return
ii. Share price and divided growth rate
b. Otama LTD has an issue of preference shares outstanding that pays a $2.85 divided every year. If this issue currently sells for $77.32 per share, what is the required return?
c. Price Tigers LTD expects to pay a $3.25 per share dividend next year. The company pledges to increase its dividend by 5.1% per year, indefinitely. If you require a return of 11% on your investment, how much will you pay for the company's share?

Accounting for Business :

Question 1
(Note this question is Q3 in the Pre-recorded Tutorial Questions)

The cash flows shown below were extracted from the accounts of Jason Taylor, a music shop owner.

Repayment of loan	$390	000
Sale of property	390	000
Interest received	1	560
Payment to employees	78	000
Receipts from customers	273	000
Expenses paid	23	400
Computer equipment purchase	23	400
GST paid		780
Payments to suppliers	156	000
Income taxes paid	3	120
Beginning cash balance	7	800

A. Prepare a statement of cash flows using the direct method.
B. Outline some cash flow warning signals.

Question 2
(Note this question is Q3 in the Pre-recorded Tutorial Questions)

Selected information for two companies competing in the catering industry is presented in the table below:

Account Name	Lawson	Dawson
Current assets	$110500	$167900
Non-current assets	$250000	$299000
Current Liabilities	$58600	$23500
Non-current Liabilities	$89700	$145000
Equity	$212200	$298400
Profit	$75000	$53000

Required:
A. Calculate the following ratios for Lawson and Dawson:
i. Current ratio.
ii. Return on Assets (ROA).
iii. Return on Equity (ROE).
B. From your calculations in part (A), explain which entity is in a more favourable position.
C. Discuss two limitations of ratio analysis as a fundamental analysis tool.

Reference no: EM132554601

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