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Bond, Share, WACC, IRR

1 The following information relates to Jasper LLC:

Bonds units - 1000 units of $1 each
Bonds Amount - $1,000,000
Maturity - 5 years
Market Rate - 8%
Coupon Rate - 10%
Interest payments - Twice yearly.

QUESTION:

1. What is the price of the bond?

2 PFC Properties has the following information:
Market value of Bonds - $350,000
Market value of preferred stock - $500,000
Market Value of equity - $800,000
D1 = $2.45
P1 = $85
P0 = $70
Interest on bonds = 8%
Marginal tax rate = 40%
Cost of preferred stock = 9%

QUESTIONS:

1. Calculate the WACC.

3 Market Maker, Inc is going through stages of growth. The first three years is supernormal.
The following information relate to the company:
Growth rate during the supernormal growth stage = 30%
Growth rate during the normal growth stage = 8%
Expected Rate of return = 12%
Dividend for year one = $2.45/SHARE

QUESTION:

1. Calculate P0.

4 Jerome has just been coaxed into investing in a real estate project by his Friend.
The project will cost 25,000 dollars with the following cash flows:

1 8,000
2 5,000
3 9,000
4 10,000
5 5,000

QUESTION:

1. If Jerome's cost of capital is 8%, what is his IRR?

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Solution Summary

The calculations for price of the bond, price of the share, WACC and IRR have been carried out.

$2.19