The bonds mature in 10 years. The firm’s average tax rate is 30% and its marginal tax rate is 34%. b. A new common stock issue that paid a $1.75 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 8% per year.
MGT 547 Fixed Income Security Analysis Professor Hongjun Yan YALE SCHOOL OF MANAGEMENT Solutions to Problem Set 1: Zeroes, Coupon Bonds, Yield, Forwards 1) $100 par of a 0.5-year 8%-coupon bond has a price of $101. $100 par of a 1-year 10%-coupon bond has a price of $104. a) What is the price of $1 par of a 0.5-year zero? 104 d0.5 = 101 ⇒ d0.5 = 101/104 = 0.9711538 b) What is the price of $1 par of a 1-year zero? 5d0.5 + 105d1 = 104 ⇒ d1 = (104 - 5d0.5)/105 = (104-5×0.9711538)/105 = 0.94423 c) Suppose $100 of a 1-year 6%-coupon bond has a price of $99.
| | | $30.45 per unit and $27,721 respectively. | | | $30.45 per unit and $69,775 respectively. | | | 6. If sales are $791,788, variable costs are 80% of sales, and operating income is $233,054, what is the contribution margin ratio? Select the correct answer.
Dixita Patel Chapter 6 homework Managerial Finance July 31, 2012 Critical Thinking 6.6. Coupon rate: how does bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required return on a bond price? Coupon rate is the annual coupon divided by the face value of a bond. In this case Bond Issuers look at outstanding bonds of comparable maturity and risk.
(0.5 points) $2,322.00 b. What is the total of the company's liabilities? (0.5 points) $1,125.00 c. What is the total owner equity? (0.5 points) $1,197.00 4. Calculate the following financial ratios.
The repayment of the coupon bond will be the par value plus the last coupon payment times the number of bonds issued. So: Coupon bonds repayment = 30,000($1,000+40)) = $31,200,000 The repayment of the zero coupon bond will be the par value times the number of bonds issued, so:Zeroes: repayment = 315,589($1,000+0) = $315,588,822 3. Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 9 percent, and have five years to maturity.
$35,000 0.8 1st Investment, 40,000 1.4 2nd Investment Total $75,000 ($35,000/$75,000)(0.8) + ($40,000/$75,000)(1.4) = 1.12 6-2 Required Rate of Return Assume that the risk-free rate is 6% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.7? rRF = 6%; rM = 13%; b = 0.7; Solve for : rs = ? rs = rRF + (rM - rRF)b = 6% + (13% - 6%)0.7 = 10.9% 6-7 Required Rate of Return Suppose rRF = 9%, rM = 14%, and bi = 1.3. a. What is ri, the required rate of return on Stock i?
If the interest rate is 12% per year, what is the present value of this annuity? a. $1,229.97 b. $496.76 c. $556.38 d. Other 7. Given the following cash flow stream at the end of each year: Year 1: $4,000 Year 2: $2,000 Year 3: 0 Year 4: -$1,000 Using a 10% discount rate, the present value of this cash flow stream is: a.
Vodafone-Mannesmann Case Questions 1. Vodafone proposes that each Mannesmann share would receive 53.7 Vodafone shares, so that in aggregate Mannesmann shareholders would own 47.2% of the equity of the newly combined firm, 1 and Vodafone shareholders 52.8%. Based on December 17, 1999 stock prices how much would Vodafone shareholders contribute to the newly combined firm? (hint: look at the current market caps of Vodafone’s and Mannesmann’s shares) Assume in what follows that the stock prices prevailing on October 21 reflect the stand-alone values of the firm, so that both firms would trade at October 21 prices if the bid failed and the merger did not go through. a. b.
To make it matches with chosen Rf rate the appropriate measure of risk premium is Spread between S&P 500 Composite Returns and Long-term U.S . Government Bond Returns. The market risk premium is estimated as the difference between the arithmetic average of annual holding period returns on a market and the arithmetic average of annual holding returns on a portfolio of government securities. Thus, it will be 7.43%. β = Beta of the Asset: The case provides equity beta: 0.97.