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Bond Valuation

Successful Finance for a Company

1. How does expertise in finance help a company become successful? Be specific and explain at least three ways. (TCO A) 2. Answer all five questions. Explain how you determined the answer and show your work. (TCO B) Questions: a. You want to borrow $1,000 from a friend for one year, and you propose to pay her $1,1

Philadelphia Electric Bonds

Philadelphia Electric has many bonds trading on the New York Stock Exchange. Suppose PhilEl's bonds have identical coupon rates of 9.125% but that one issue matures in 1 year, one in 7 years, and the third in 15 years. Assume that a coupon payment was made yesterday. 1. If the yield to maturity for all three bonds is 8%, what i

Short Finance Problems

1) Data Corporation has a bond issue outstanding with an annual coupon rate of 7 percent and 4 years remaining until maturity. The par value of the bond is $1,000. Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. The bond pays interest annually. . 2) Refer to Pr

Warrants and Coupon Rates

The ABC Corporation is setting its terms on a new issue with warrants. The bonds have a 30-year maturity and semiannual coupon. Each bond will have 25 warrants attached which give the holder the right to purchase one share of Random stock per warrant. ABC's investment banker estimates that each warrant has a value of $15.50. A s

What are the YTM and YTC on Rourke's bonds?

1) Rourke Motor Co. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1000 and their current market price is $1,130.35. However, Rourke may call the bonds in 8 years at a call price of $1,060. What are the YTM and YTC on Rourke's bonds? YTM= YTC= 2)

Gains and losses in investments in trading securities

#6 XYZ Company began operations in 2006. Since then, it has reported the following gains and losses for its investments in trading securities on the income statement: 2006 2007 2008 Gains (losses) from sale of trading securities $ 15,000 $(20,000) $ 14,000 Unrealized holding losses on valuation of trading se

Financial Problem

Chpt. 4, 10 1. Assume IBM is expected to pay a total cash dividend of $3.60 next year and dividends are expected to grow indefinitely by 3 percent a year. Assume the required rate of return (i.e. equity holder's opportunity cost of capital) is 9 percent. Assuming this is the best information available regarding the future

Decisions About Bond Purchase

Bakersfield Co. 8.5s16 bonds pay interest semiannually, and are quoted in the WSJ ad 88 1/2. If your rate of return is 10%, would you buy these bonds in 2001 and what is the total amt. Please show the calculations to get the answer. Question about bonds purchase or not? Bakersfield Co. 8.5s16 bonds pay interest semiannual

Bond Computations for Heide Co, Reymont Co, Czeslaw, and Marie Curie Inc.

(Comprehensive Problem; Issuance, Classification, Reporting) Presented below are four independent situations. 1. On March 1, 2008, Heide Co. issued at 103 plus accrued interest $3,000,000, 9% bonds. The bonds are dated January 1, 2008, and pay interest semiannually on July 1 and January 1. In addition, Heide Co. incurred $27

Preferred Stock and Maturity Calculations

1. Bavarian Sausage, Inc. has preferred stock outstanding. This stock pays a semiannual dividend of $1.25. If the next dividend is paid six months from now and the annual required return is 10%, what should be the value of the preferred stock? Answer $25 2. A 15-year, 8%, $1000 face value bond is currently trading at $958. T

Weighted avergage cost of capital for internal and external funds

Given the following information, calculate the WACC Percent of capital structure: Debt 55% Common Equity 5 Preferred stock 40 Additional info: Bond coupon rate 8.5% Bond yield 7% Bond flotation cost 2% Dividend, expexted common $1.50 Price, common $30.00 Dividend, preferred 5% Flotation cost, preferred 3% Flotat

Working with bond prices

Consider the two bonds described below: Bond A Bond B Maturity Years 15 20 Coupon Rate 10 6 (Paid Semiannually) Par Value 1,000 1,000 a. If both bonds had a required return of 8%, what would the bonds prices be? Show wor

Growth and Return on Invested Capital

3. How does growth and return on invested capital drive free cash flow? Illustrate with an example employing constant and non-constant growth rates. 7. Why might large firms experience lower rates of growth than smaller firms? What is the danger of having a large company attempt to match the growth of a small company?

Yield to Maturity / Yield to Call

10. BEA Industries has just issued a callable (at 102) ten-year, 8% coupon bond with semi-annual coupon payments. The bond can be called at 102 in three years or anytime thereafter on a coupon payment date. It has a current price of 99. What is the Yield to Maturity (YTM) on this bond? (Points: 2) 8.65% 8.15%

Coupon Redemptions & Estimated Liability

A Music Shop gives its customers coupons redeemable for a poster plus a Beyonce CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were

General Electric

I need help on the follwing questions. Using the Internet, or other resources conduct research on the securities that you selected. Be sure to carefully examine the organizations' 10K and investment reports, general economic data, and Federal Reserve data. (at least 600 words). part a. The security or stock that i will b

Calculate the Present Value of a bond at several different interest rates

Assume the following information for an existing bond that provides annual coupon payments: Par value = $1,000 Coupon rate = 11% Maturity = 4 years Required rate of return by investors = 11% a. What is the present value of the bond? b. If the required rate of return by investors were 14% instead of 11%, what would be the

Fed's increase in the money supply: effect to bond prices

Let's assume that bond market participants suddenly expect the Fed to substantially increase the money supply. a. Assuming no threat of inflation, how would bond price be affected by this expectation? b. Assuming that inflation may result, how would bond prices by affected? c. Given your answers to (a) and (b) explain why e

Cost of Equity and Debt for HD Industries

HD Industries data is as follows: - The firm's tax rate is 40% - The current price of HD's 12% coupon, semiannual payment, noncallable bonds wit 15 years remaining to maturity is $1,153.72. HD does not use short term interest bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. - Th

Yield Curve and Interest Rates

Explain the yield curve and how it reacts to changes in interest rates, and can you explain why long-term (30-year) bonds generally trade at a higher yield than short-term maturities. Apply the forces of inflation, monetary and fiscal policy, trade deficit and foreign influences in your explanation

Corporate Finance (Problem Set)

(Bond valuation) A $1,000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond's coupon rate is 7.4%. What is the fair value of this bond? (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at a rate

Bonds & budgets: Interest payable

1. Six years ago Hill City issued $10 million of 6% term bonds, due 30 years from the date of issue. Interest on the bonds is payable semi-annually on January 1 and July 1. Hill City has a September 30 fiscal year end. The amount of interest payable that would be included on the balance sheet for the debt service fund of Hill Ci

Computing the After-Tax Weighted-Average Cost of Debt

See the attached file. Calculating the Cost of Debt Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 31 percent, what is the aftertax cost of Ying's debt? (Round your answer to 2 decimal places, e.g. 32.16.)

Please assist with the following - face value question

1. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond? $79.63 $98.85 $79.36 $89.85 0.0605 2. What is the price per $100 face value of a four-year, zero-coupon, risk-free bond? $79.63 $98.85 $79.36 $89.

What is the arbitrage profit? Which of the following is NOT true? All of the following are types of traders in futures, forward, and options markets EXCEPT: What is the futures price above which there will be a margin call? What hedge ratio should be used when hedging a one month exposure to the price of commodity A? What position should the fund manager take to hedge exposure to the market over the next two months?

Question 1: The price of gold is currently $700 per ounce. Forward contracts are available to buy or sell gold at $900 for delivery in one year. An arbitrageur can borrow money at 10% per annum. What is the arbitrage profit? Question 2: A trader enters into a one-year short forward contract to sell an asset for $60 when the

Retirement of Bonds for Marin Co.

The December 31, 2004 balance sheet of Marin Co. included the following items: 7.5% bonds payable due December 31, 2012 $800,000 Unamortized discount on bonds payable 32,000 The bonds were issued on December 31, 2002 at 95, with interest payable on June 30 and December 31. (Use straight-line a