A firm is 30% debt and 70% equity. The firm's tax rate is 40%. Their bonds trade for $990, mature in five years, and have a coupon rate of 8% paid annually. The firm's common stock trades at $15 per share and just paid a dividend of $3per share. The dividends are expected to grow at a rate of 3% per year forever. Round all answers to the nearest hundredth - Example 5.01 for 5.01% The bond's yield is ____%
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
A firm is 30% debt and 70% equity. The firm's tax rate is 40%. Their bonds trade for $990, mature in five years, and have a coupon rate of 8% paid annually. The firm's common stock trades at $15 per share and just paid a dividend of $3per share. The dividends are expected to grow at a rate of 3% per year forever.
Round all answers to the nearest hundredth - Example 5.01 for 5.01%
The bond's yield is ____%
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