AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities: Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25% Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5% Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investors Diversified investors in the market is currently demanding a 2.0% premium over government securities The following are the current instruments issued by AlphaGet: Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 9.0% Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 8.5% Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 10.0% AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five. 1. What is the value of Bond B for AlphaGet? Clue - correct answer should have a string of number "58" appearing in sequence in any unit until two decimal points. 2. What is the cost of debt for AlphaGet? 3. What is the real risk-free rate for AlphaGet using the fisher rule?
AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities: Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25% Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5% Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investors Diversified investors in the market is currently demanding a 2.0% premium over government securities The following are the current instruments issued by AlphaGet: Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 9.0% Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 8.5% Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 10.0% AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five. 1. What is the value of Bond B for AlphaGet? Clue - correct answer should have a string of number "58" appearing in sequence in any unit until two decimal points. 2. What is the cost of debt for AlphaGet? 3. What is the real risk-free rate for AlphaGet using the fisher rule?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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AlphaGet is currently assessing the value of its securities and have obtained the following information that should provide AlphaGet with the necessary information to estimate the value of its securities:
- Current long-term government securities carry a yield of 6.5% which includes an inflation premium of 1.25%
- Based on the credit rating of AlphaGet of BAA, the estimated credit spread of AlphaGet is at 2.5%
- Utilizing the work of an external expert, beta of AlphaGet is estimated at +1.5 for marginal investors
- Diversified investors in the market is currently demanding a 2.0% premium over government securities
The following are the current instruments issued by AlphaGet:
- Bond A carries a 5-year tenor and will mature in 3 years with a face value of Php250,000 carrying a coupon of 9.0%
- Bond B carries a 10-year tenor and will mature in 5 years with a face value of Php500,000 carrying a coupon of 8.5%
- Bond C carries a 5-year tenor and was just recently issued with a face value of Php500,000 carrying a coupon of 10.0%
AlphaGet had historically paid dividends out at a rate of 10% of its net income. Dividends paid out this year amounted to Php120.00 per share and is expected to grow by 5% per year over the next 5 years before stabilizing at 3.5% perpetually after year five.
1. What is the
2. What is the cost of debt for AlphaGet?
3. What is the real risk-free rate for AlphaGet using the fisher rule?
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