Give typing answer with explanation and conclusion Suppose that your company just paid a dividend of $1.2; the dividends are expected to grow at a constant rate of 3.5% indefinitely. Today'smarket price/share is $15.50. Suppose also that your company has some bonds outstanding in the market selling for $896.85. The bondshave 12 years left to maturity, with 10% coupon rate with semi-annual payments and $1000 par value. If your company's capital structure is35% debt and 65% equity, with the tax rate of 40% what is the WACC?8.15%9.92%6.49%9.08%7.65%

WACC stands for weighted average cost of capital.It is the blended cost of capital considering all…

Answered: Suppose that your company just paid a…

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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Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 9 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 7.9 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $5.3-per-share annual dividend forever? c. A company is planning to set aside money to repay $159 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. \table[[a. PV,,],[b. PV,,],[c1. PMT,,million],[c2. PMT,9.60,million]]
Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000. Suppose that one year after issue, the going market interest rate is 10% (rather than 6%). What would the price have been? Explain your reasoning SHOW ALL WORK AND USE FINANCIAL CALCULATOR
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 6.60 percent coupon bonds are selling at a price of $825.00. The bonds pay interest semiannually. If these bonds are the only debt outstanding, answer the following questions: What is the current YTM of the bonds?
I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market for $960.45. These bonds carry a 9 percent coupon paid semiannually, and have 15 years remaining to maturity. What is the capital gain yield assuming that the interest rates will remain constant over the year?
Solve the following problems regarding bank loans, bonds, and stocks. Assume an interest rate of 12 percent. a. How much would you pay for a 10-year bond with a par value of $1,000 and a 10.4 percent coupon rate? Assume interest is paid annually. b. How much would you pay for a share of preferred stock paying a $6.2-per-share annual dividend forever? c. A company is planning to set aside money to repay $168 million in bonds that will be coming due in ten years. How much money would the company need to set aside at the end of each year for the next ten years to repay the bonds when they come due? How would your answer change if the money were deposited at the beginning of each year? Note: Round your answers to 2 decimal places. a. PV b. PV c1. PMT c2.PMT million 8.55 million
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 8.2 percent coupon bonds are selling at a price of $790.40. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answer the following questions. - What is the current YTM of the bonds?
A firm raises capital by selling $18,000 worth of debt with flotation costs equal to 3% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 10%, what is the bond's YTM? (Round to two decimal places.)
Show all your work. The bonds issued by XYZ CO. currently sell for $1,020. They have a 8-year maturity, an annual coupon of $75, and a par value of $1,000. What are their current yield and capital gains yield during the current year?
Last year a firm issued 20-year, 8% annual coupon bonds at a par value of $1,000.a. Suppose that 1 year later the going market interest rate drops to 6%. What is thenew price of the bonds, assuming they now have 19 years to maturity? b. Suppose that 1 year after issue, the going market interest rate is 10% (rather than6%). What would the price have been?
What is the average return in the market (Rm)?
IN EXCEL! Assume you would like to estimate ABC Company's debt cost. ABC's bond has a semi-annual 5.25 % coupon rate and a Par value of $1,000, with a market price of 86 percent of the Par. Assume a number of years to maturity of 12 years. Estimate the cost of debt for ABC Company. Assume the same number of years to maturity of Question 1. You buy a zero-coupon to reach your goal of having $1,000,000.00 when the zero-Coupon bond matures. The yield of this Zero-Coupon bond is 6.25% compounded semiannually, how much must you invest today to achieve your goal? The face value of each zero-coupon bond is $10,000. IN EXCEL
A firm raises capital by selling $30,000 worth of debt with flotation costs equal to 1% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 12%. what is the bond's YTM? The bond's YTM is%. (Round to two decimal places)

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