Reference no: EM132853386

Questions -

Q1. Fresno Corp. is a fast-growing company whose management expects it to grow at a rate of 30 percent over the next two years and then slow down to a growth rate of 18 percent for the following three years. If the last dividend paid by the company was $2.15, estimate the dividends for the next five years. Compute the present value of these dividends if the required rate of return is 14 percent.

Q2. Moriband Corp. paid a dividend of $2.15 yesterday. The company's dividend is expected to grow at a steady rate of 5 percent for the foreseeable future. If investors in stocks of companies like Moriband require a rate of return of 15 percent, what should be the market price of Moriband stock?

Q3. Nyeil, Inc., is a consumer products firm that is growing at a constant rate of 6.5 percent. The firm's last dividend was $3.36. If the required rate of return is 18 percent, what is the market value of this stock if dividends grow at the same rate as the firm?

Q4. Reco Corp. is expected to pay a dividend of $2.25 next year. The forecast for the stock price a year from now is $37.50. If the required rate of return is 14 percent, what is the current stock price? Assume constant growth.

Q5. Calculate the price of a five-year bond that has a coupon of 6.5 percent paid annually. The current market rate is 5.75 percent.

Q6. Bigbie Corp. issued a five-year bond a year ago with a coupon of 8 percent. The bond pays interest semiannually. If the yield to maturity on this bond is 9 percent, what is the price of the bond?

Q7. Rockwell Industries has a three-year bond outstanding that pays a 7.25 percent coupon and is currently priced at $913.88. What is the yield to maturity of this bond? Assume annual coupon payments.

Q8. BA Corp is issuing a 10-year bond with a coupon rate of 8 percent. The interest rate for similar bonds is currently 6 percent. Assuming annual payments, what is the value of the bond?