Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Problems are to be worked in order. Remember to show any assumptions that you used.  All work is to be completed individually. You can use Excel, a financial calculator or solve the problems by hand.

1. Starbucks has one debt issue outstanding. Debt matures on August 15, 2017, and has a 6.25% coupon. Coupons are paid semi annually. Bond is priced to yield 1.61% compound semi annually. Estimate price of the bond on February 15, 2013, immediately after that coupon is paid.

2. You buy a SML Bond for $980. Bond has a face value of $1000 and an annual coupon rate of 8%.  There are 5 years left until maturity.

a. Find the yield to maturity on the bond?

b. At the end of two years, price has risen to $1050.  What is the yield to maturity based on new price?

c. As of a special delivery by the stork, you decide to sell bond at the end of year 2 for $1050.  What was your return?  Why does this vary from the yield to maturity? Suppose you do get the first two coupon payments.

3. You have following information for Starbucks: Current EPS is $1.79. The present dividend is $.68 per share. The return on equity is 24%.  The present price is $49.22. 

a. Use dividend discount model (also known as constant growth model) to compute the return for Starbucks.


b. Suppose your answer to part a. is correct, compute the present value of the growth opportunities (PVGO).

4. Tank Industries Washers expects to pay following dividends over the next 4 years: $2.50, $3.20, $4.75 and $5.20 respectively (starting at time 1).

a. After year 4, the firm expects a constant growth rate of 3%.  If investors need 11%, what is the present share price?

b. The CEO, Major Payne, has identified numerous new investment opportunities.  He is trying to convince investors to back his strategy.  He will require to keep the dividends at $2.50 each year for the next four years. After year 4, the growth rate will be 10% forever.  Based on increased risk, the other investors increase the required return to 15%.  Should they back his strategy? Hint: Re-estimate the present price based on the new cash flows.

5. BAC is considering an issue of preferred stock.  The dividends are 8.12% of the $25 par value. 

a. If the present price is $26.25 per share, find the return on the preferred stock?

b. Assume the preferred stock would mature in 20 years.  If price is $26.25 per share, what is the return on the preferred stock? HINT: This is just like a bond, but face value is 25.  For a problem, you could suppose dividends are annual.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92016

Have any Question? 


Related Questions in Basic Finance

1 describe the circumstances in which it is acceptable to

1. Describe the circumstances in which it is acceptable to conduct research without obtaining informed consent from human participants. 2. What does IRB stand for, and what is its purpose? 3. Is it acceptable for researc ...

1 what is the advantage of using multiple measures for a

1. What is the advantage of using multiple measures for a single variable? What is the disadvantage? 2. Briefly explain how a ceiling effect (or floor effect) can affect the outcome of a research study.

Uncertain scenario - maximizing the meanthe potential

Uncertain Scenario - Maximizing the Mean The potential revenues of all projects are in fact uncertain. The company determines that the revenue for project 1 is following a uniform distribution ranging from $1,200,000 to ...

Is wall street a casino or an investment in the future and

Is Wall Street a casino or an investment in the future and why? Use examples to back your stances? What do you fear the most about Wall Street and investing in the stock market? Have you learned anything in this module t ...

For each of the following research goals identify which of

For each of the following research goals, identify which of the descriptive research designs would be most appropriate: a. To describe how peer counseling affects a severely depressed teenager. b. To describe the social ...

In given problem what if mr nelligan was joined in the

In given Problem, what if Mr. Nelligan was joined in the foreclosure suit but forgot to attend the sale and bid? Does Mr. Nelligan have any other way of getting Ms. Rosen to pay? Problem:- Mort owns a property. Jessica R ...

The ok railroad needs to raise 95 million for capital

the O.K. Railroad needs to raise $9.5 million for capital improvements. One possibility is a new preferred stock issue - 8 percent dividend, $100 par value - stock that would yield 9 percent to investors. Flotation costs ...

1 compare the ethical dilemmas faced by behavioral

1. Compare the ethical dilemmas faced by behavioral scientists with those faced by scientists in other scientific fields. What are the particular ethical problems that arise in behavioral science research? 2. Explain why ...

What are inventories briefly explain what happens to the

What are inventories? Briefly explain what happens to the level of inventories when aggregate expenditure is greater than real GDP, what happens when aggregate expenditure is less than real GDP, and what happens when agg ...

Zapata corporation will pay dividends of 500 600 and 700 in

Zapata Corporation will pay dividends of $5.00, $6.00, and $7.00 in the next three years. Thereafter, the company expects its dividend growth rate to be a constant 10 percent. If the required rate of return is 15 percent ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro