Question

Problem 5-01
Bond Valuation with Annual Payments

Jackson Corporation's bonds have 5 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 7%. The bonds have a yield to maturity of 12%. What is the current market price of these bonds? Round your answer to the nearest cent.

Problem 5-02
Yield to Maturity for Annual Payments

Wilson Wonders' bonds have 15 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 12%. The bonds sell at a price of $1,100. What is their yield to maturity? Round your answer to two decimal places.

Problem 5-06
Maturity Risk Premium

The real risk-free rate is 3%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.5%. What is the maturity risk premium for the 2-year security?

Problem 5-07
Bond Valuation with Semiannual Payments

Renfro Rentals has issued bonds that have a 11% coupon rate, payable semiannually. The bonds mature in 14 years, have a face value of $1,000, and a yield to maturity of 8.5%. What is the price of the bonds? Round your answer to the nearest cent.

Problem 5-13
Yield to Maturity and Current Yield

You just purchased a bond that matures in 15 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.37%. What is the bond's yield to maturity? Round your answer to two decimal places.

Problem 7-02
Constant Growth Valuation

Boehm Incorporated is expected to pay a $3.20 per share dividend at the end of this year (i.e., D₁ = $3.20). The dividend is expected to grow at a constant rate of 5% a year. The required rate of return on the stock, r_s, is 11%. What is the estimated value per share of Boehm's stock? Round your answer to the nearest cent.

Problem 7-04
Preferred Stock Valuation

Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $4 at the end of each year. The preferred sells for $40 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required return equal to the expected return)? Round the answer to two decimal places.

Problem 7-05
Nonconstant Growth Valuation

A company currently pays a dividend of $1 per share (D₀ = $1). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.8, the risk-free rate is 5%, and the market risk premium is 4%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

Problem 7-07
Horizon Value of Free Cash Flows

Current and projected free cash flows for Radell Global Operations are shown below.

	Actual 2016	2017	Projected 2018	2019
Free cash flow	$607.24	$667.92	$707.97	$750.42
(millions of dollars)

Growth is expected to be constant after 2018, and the weighted average cost of capital is 10.4%. What is the horizon (continuing) value at 2019 if growth from 2018 remains constant? Round your answer to the nearest dollar. Round intermediate calculations to two decimal places.

Answer 1

The answer for above problems are explained below.