Reference no: EM132909634

1) A stock is expected to pay $3 dividend in one year from today and its dividend is expected to grow at a constant rate 9%. If the beta for this stock is 1.75, risk free return is 1%, and market risk premium is 8%, what is the current fair value of this stock today and what is the fair value of this stock 6 years from now?

2) A stock just paid its $1 and the stock is currently selling at $50 per share. If the beta for this stock is 1.8, risk free return 2% and market total return is 7%, what is its expected dividend yield and capital gain yield for this coming year? Assume that this stock is in a market equilibrium.

3) AI intelligence, a new artificial intelligent for medical devices company, is expected to experience short-term supernormal dividend growth rates of 40% in year 1, 30% in year 2 and 20% in year 3. After 3 years of supernormal growth, this company dividend is expected to grow at a constant rate of 5%. However, today due to an increased demand for medical devices, analysts have made an upward projection on its short-term growth rates to 55% in year 1, 40% in year 2 and 28% in year 3 and long-term constant growth rate of 6%. If the most recent dividend paid is $1 per share and its required return remains at 15%, approximately how much do you expect the change in AI intelligence stock price per share today (indicate an increase or a decrease in stock price and show your calculation steps)?

4) Apple Inc. recently issued 15-year bonds at $950 per share. These bonds pay $25 coupons every six months. Their price has remained stable since they were issued, i.e., they still sell for $950 share today. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 15 years, a par value of $1,000, and it will pay $20 coupons every six months. If both bonds have the same yield to maturity, how many shares of new bonds must Apple Inc. issue today to raise $2,188,000 cash today?

5) A company currently has an 8 years bond that is callable in 3 years from today with a call premium of 1%. This bond annual coupon rate is 9% paid semi-annually and it is currently selling at $1,020 per share. What is the bond annual yield to call and the bond annual yield to maturity? Also, if general interest rate is expected to remains unchanged, based on comparison between yield to call and yield to maturity that you have calculated, do you think is best for this company to call this bond today and why or why not?