What will the bonds sell for today

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Question -

a. Shine Company sells industrial cleaners producing a revenue stream that has remained unchanged in the last few years. The company does not expect any change in its sales or earnings in the next several years. The share is currently selling at $25.88. If the required rate of return is 13 percent, what is the dividend paid by this company?

b. RTZ Ltd. has just paid a dividend of $4.45. The company has estimated a growth rate of 8 percent for the next several years. If the appropriate discount rate is 14 percent, what is the current price of this share?

c. HealthTech Ltd a biotech company has forecast the following growth rates for the next three years:

year 1, 30 percent,

year 2, 25 percent,

and year 3, 20 percent.

After year 3, the company expects to grow at a constant rate of 7 percent indefinitely. The company paid a dividend of $2.00 recently. If the required rate of return is 16 percent, what is the market value of this share?

d. A mining company is issuing 20-year bonds that will pay coupons semi-annually. The coupon rate on this bond is 7.8 percent with a face value of $1,000. If the market rate for such bonds is 7 percent, what will the bonds sell for today?

Reference no: EM132612255

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