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Biddie32
Mar 17, 2009, 04:23 PM
The Nikko Company's last dividend was $1.50. The dividend growth rate is expected to be constant at 15% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If Nikko's required return (rs) is 11%, what is the company's current stock price?

Biddie32
Mar 17, 2009, 04:24 PM
In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows:
Long-term debt (bonds, at par) $10,000,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

Curlyben
Mar 17, 2009, 04:31 PM
Thank you for taking the time to copy your homework to AMHD.
Please refer to this announcement: Ask Me Help Desk - Announcements in Forum : Homework Help (https://www.askmehelpdesk.com/finance-accounting/announcement-font-color-ff0000-u-b-read-first-expectations-homework-help-board-b-u-font.html)

Biddie32
Mar 17, 2009, 04:47 PM
O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $850. What is the bond's nominal (annual) coupon interest rate?

Biddie32
Mar 17, 2009, 04:50 PM
Pappas Products is considering Projects S and L, whose cash flows are shown below starting with the investment required today and followed by the annual cashflows over the next four years. These projects are mutually exclusive, and the CEO believes the IRR is the best selection criterion, while the CFO advocates the MIRR. If the decision is made by choosing the project with the higher IRR rather than the one with the higher MIRR, how much, if any, value will be forgone? The cost of capital to the firm is 11%.

S -$1,100, $550, $600, $100, $100
L -$2,700, $650, $725, $800, $1,400

Biddie32
Mar 17, 2009, 04:52 PM
Assume that you have the option to invest in two Stocks U and L and that the likelihood of either a recession or an expansion in future is the same (i.e. 50%). Stock U will generate a return of 30% in a recession while stock L will result in a loss of -20%. In an expansion stock U will generate 10% return while stock L will generate a return of 70%.
What is the standard deviation of an equally weighted portfolio of stocks U and L?