1. An analyst has gathered the following information about ABC Corporation and the market:

The required rate of return on equity (k_e) is 15% per year.

Current dividend per share of common stock is $3.50.

The expected constant dividend growth rate is 4.20%.

The company has decided to issue $1,000 face value bonds with a 7.5% coupon paid quarterly and a 25-year maturity.

The required rate on the bond is 10%.

a. What is the current market value (PV) of the bond per 1000 of par value?

b. Identify if the bond is trading at a discount, at par or at a premium.

c. What is the intrinsic value of the companys common stock (P₀)?