a. Use the constant-growth dividend model (Gordon growth model) to find the value of each firm shown in the following table. Firm Dividen espected next year ($) Dividend growth rate (%) Required return (%) A 1.20 8 13 B 4.00 5 15 C 0.65 10 14 D 6.00 8 9 E 2.25 8 20
a. Use the constant-growth dividend model (
each firm shown in the following table.
| Firm | Dividen espected next year ($) | Required return (%) | |
| A | 1.20 | 8 | 13 |
| B | 4.00 | 5 | 15 |
| C | 0.65 | 10 | 14 |
| D | 6.00 | 8 | 9 |
| E | 2.25 | 8 | 20 |
b. Even though most corporate bonds in the United States make a coupon payments
semiannually, bonds issued elsewhere often have annual coupon payments. Suppose
a German company issues a bond with a par value of €1,000, 23 years to maturity,
and a coupon rate of 3.8% paid annually. If the yield to maturity is 4.7%, what is the
current price of the bond?
c. Excellent Berhad has bonds on the market with 14.5 years to maturity, a YTM of 5.3%,
a par value of RM1,000 and a current price of RM1,045. The bonds make semiannual
payments. What must the coupon rate be on these bonds?
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