In: Finance
Stocks
A company has a constant growth rate of 5%. The company's risk adjusted discount rate is 7%. The company has a $2 dividend. What is the per share value of the stock?
Bonds
Calculate the value of each of the bonds below. Interest is paid semi-annually.
Bond |
Par Value |
Years to Maturity |
Coupon Interest Rate |
Required Return |
---|---|---|---|---|
Bond #1 |
1000 |
25 |
10% |
12% |
Bond #2 |
1000 |
15 |
6% |
6% |
Bond #3 |
500 |
10 |
7% |
10% |
First:
Share price = 2*(1+5%)/(7% - 5%)
= 105
Bond 1
Particulars | Cash flow | Discount factor | Discounted cash flow |
present value Interest payments-Annuity (5%,50 periods) | $ 660.00 | 18.25593 | $ 12,048.91 |
Present value of bond face amount -Present value (5%,50 periods) | $ 11,000.00 | 0.08720 | $ 959.24 |
Bond price | $ 13,008.15 |
Bond 2:
Particulars | Cash flow | Discount factor | Discounted cash flow |
present value Interest payments-Annuity (3%,30 periods) | $ 630.00 | 19.60044 | $ 12,348.28 |
Present value of bond face amount -Present value (3%,30 periods) | $ 21,000.00 | 0.41199 | $ 8,651.72 |
Bond price | $ 21,000.00 |
Bond 3:
Particulars | Cash flow | Discount factor | Discounted cash flow |
present value Interest payments-Annuity (5%,20 periods) | $ 122.50 | 12.46221 | $ 1,526.62 |
Present value of bond face amount -Present value (5%,20 periods) | $ 3,500.00 | 0.37689 | $ 1,319.11 |
Bond price | $ 2,845.73 |
please rate.