What should be the price of one share of firm A stock

Assignment Help Financial Accounting
Reference no: EM132916202

Question - Firm A has issued a total of 2 million corporate bonds with a maturity of 10 years and a coupon rate of 5 percent. Coupon payments occur once per year, and the face value of firm A's bonds is $1,000. The current market price for one of the bonds issued by firm A is $830.

Firm A plans to issue 8 million equity shares to be traded on public exchanges. Each share is expected to pay a $9 cash dividend after one year, and the firm's CFO forecasts earnings per share of $24 for the year ahead. Firm A's return on equity is 16 percent. Under these conditions, the beta of firm A's common stock is estimated at -0.1, and the beta of firm A's assets is estimated at 0.5.

1. What should be the price of one share of firm A's stock?

2. Firm A's CFO suggests to issue another 1 million corporate bonds in addition to the 2 million already issued at the same market price of $830. What effect would this have on the IPO price of firm A's stock?

Reference no: EM132916202

Questions Cloud

FIN501 Fundamentals of Finance Assignment : FIN501 Fundamentals of Finance Assignment Help and Solution, Fiji National University - Assessment Writing Service
What will the ex-dividend stock price be : What will the ex-dividend stock price be if the relevant tax rate is 21 percent and all else is held constant? Breakers Engineering is preparing to pay.
How many shares will be outstanding : B&K Lumber has 50,600 shares of stock outstanding at a price per share of $68. How many shares will be outstanding if the firm does a 5-for-2 stock split?
What is the optimal order quantity for MBC : The cost of holding a gallon of fuel in the storage tanks is $0.04 per month, or $0.48 per year; What is the optimal order quantity for MBC
What should be the price of one share of firm A stock : Coupon payments occur once per year, and the face value of firm A's bonds is $1,000. What should be the price of one share of firm A stock
How an organization gains a competitive advantage : Determine organizational risk and growth opportunities in order to develop a strategic plan. how an organization gains a competitive advantage
How would convert the businessweaknesses into strengths : How would convert the businessweaknesses into strengths. Explain how you would match the business's strengths to its opportunities.
How many items of each should be produced : The market price are given by p1=100-2x1 and p2=125-3x2. Find how many items of each should be produced to have the joint profit maximum.
What the gain on restructuring on December : The unpaid interest on the restructured loan at this time is P750,000. (Round off PV Factor to two decimal places) What the gain on restructuring on December

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd