To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years. Compute the price of the bond if the required return on the bond is 10% and interest is paid annually. Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually. Iris Corp issued bonds with a coupon rate of 15%, pay coupons annually, have 6 years remaining to maturity, and are currently priced at $950 per bond. What is the yield to maturity? Compute the value of a share of common stock of Lara’s Cookie Company whose most recent dividend was $3.50 and is expected to grow at 2 percent per year for the next 5 years, after which the dividend growth rate will increase to 5 percent per year indefinitely. Assume a 12 percent required rate of return. Marshall Law firm expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 % per year forever. If the firm's weighted average cost of capital is 15 %, the market value of the firm's debt is $500,000, the market value of its preferred stock is $200,000 and the firm has a half million shares of common stock outstanding, what is the value of its common stock?
To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years. Compute the price of the bond if the required return on the bond is 10% and interest is paid annually. Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually. Iris Corp issued bonds with a coupon rate of 15%, pay coupons annually, have 6 years remaining to maturity, and are currently priced at $950 per bond. What is the yield to maturity? Compute the value of a share of common stock of Lara’s Cookie Company whose most recent dividend was $3.50 and is expected to grow at 2 percent per year for the next 5 years, after which the dividend growth rate will increase to 5 percent per year indefinitely. Assume a 12 percent required rate of return. Marshall Law firm expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 % per year forever. If the firm's weighted average cost of capital is 15 %, the market value of the firm's debt is $500,000, the market value of its preferred stock is $200,000 and the firm has a half million shares of common stock outstanding, what is the value of its common stock?
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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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:
Question
To finance a new line of product, Larissa Toys has issued a bond with a par value of $1,000, coupon rate of 8 percent, and maturity of 30 years.
- Compute the price of the bond if the required return on the bond is 10% and interest is paid annually.
- Compute the price of the bond if the required return on the bond is 10% and interest is paid semi-annually.
- Iris Corp issued bonds with a coupon rate of 15%, pay coupons annually, have 6 years remaining to maturity, and are currently priced at $950 per bond. What is the yield to maturity?
- Compute the value of a share of common stock of Lara’s Cookie Company whose most recent dividend was $3.50 and is expected to grow at 2 percent per year for the next 5 years, after which the
dividend growth rate will increase to 5 percent per year indefinitely. Assume a 12 percent requiredrate of return . - Marshall Law firm expects to generate
free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 % per year forever. If the firm's weighted average cost of capital is 15 %, the market value of the firm's debt is $500,000, the market value of itspreferred stock is $200,000 and the firm has a half million shares of common stock outstanding, what is the value of its common stock?
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