2.Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: an 8 percent semiannual coupon bond and a zero coupon bond. When find PV do 30m/PV to get the amount of coupon bonds.Part B: In 30 years, what will your company’s repayment be if you issue the coupon bonds? What if you issue the zeros? The repayment of the coupon bond will be the par value plus the last coupon payment times the number of bonds issued.
If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? =Preference Dividend/ Required Return= $7.5/ 6.5%= $ 115.38 13. The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.15, the market risk premium is 5.00%, and the risk-free rate is 4.00%. What is the company's current stock price, P0?
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.
Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 15%. What is the value per share of Boehm’s stock? Nick’s Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $5 at the end of each year.
11000 b. What would be the future value if the CD pays 5.0 percent? If it pays 15.0 percent? 10500; 11500 c. The First National Bank of San Francisco offers CDs with a 10.0 percent nominal (stated) interest rate but compounded semiannually. What is the effective annual rate on such a CD?
$27 c. By what amount did the company's paid-in capital increase during 20X6? $1,724,000 d. Did Star's total legal capital increase or decrease during 20X6? By what amount? $680,000 increase 2. Bond computations: Straight-line amortization Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1.
The market risk premium was not given in the case study and has been taken as the spread between stock and bond annual returns over the period 1926 – 1997 to be 7.2% 5. All figures relating to income and expense are obtained by taking the 3rd quarter figures and annualising them by multiplying the figures by 365/273 6. A historic growth rate of 57% was obtained
Initial value of Pacific ridge investment (December 1995) is: 666,667 * $1.50 + 133,333 * $0.3 = $1,040,000.4 (initial investment, exhibit 7). If we now value the rest of the company’s stock before venture capitalist investment at $1.50, we have: $1.50 * (800,000 + 4,796,000) =
c. Internal common equity where the current market price of the common stock is $43.50. The expected dividend this coming year should be $3.25, increasing thereafter at a 7% annual growth rate. The corporation’s tax rate is 34%. d. A preferred stock paying a 10% dividend on a $125 par value. If a new issue is offered, flotation costs will be 12% of the current price of $150.
a. $1,832.61 b. $1,829.08 c. $1,840.45 d. Other 6. An annuity will pay eight annual payments of $100, with the first payment to be received one year from now. If the interest rate is 12% per year, what is the present value of this annuity?