9. Bond value and changing required returns bbc company has outstanding abond issue that will mature to its 10,000 par value in 12 years. The bond has a coupon interest rate of 11% and pays interest annually.a. Find the value of the bond if the required return is (1) 12%, (2) 20%, and(3) 7%.b. Plot your findings in part a on a set of required return (x axis)market valueof bond (y axis) axes.c. Use your findings in parts a and b to discuss the relationship between thecoupon interest rate on a bond and the required return and the market valueof the bond relative to its par value.d. What two possible reasons could cause the required return to differ from the coupon interest rate?

10. To use the price/earnings multiples approach to valuation, you need to find a firm's projected earnings and the P/E multiple. One of the most popular sites toobtain these estimates is Zacks Investment Research, www.zacks.com.1. At the top of the page, locate the area where you can enter a company sticker symbol and select the desired information.2. Enter OO for Oakley Inc. and select estimates from the pull-down menu. a. What is the current mean/consensus estimate for the next fiscal years earnings? b. Using the indicated price/earnings ratio further down on that page, calculate the stock price.3. Repeat steps 2a and b for the following stocks: a. Southwest Airlines: LUVb. Microsoft: MSFTc. Weight Watchers: WTW

11. Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to use the capital asset pricing model (CAPM) to determine the applicable discount rate to use as an input to the constant-growth valuation model. Crafts stock is not publicly traded. After studying the betas of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate beta for Crafts stock would be 3.25. The risk-free rate is currently 10%, and the market return is 20%. Crafts dividend per share for each of the past 5 years isshown in the following table. Year 2003: $5 2002: $4 2001: $3 2000: $2 and 1999: $1. Given that Craft is expected to pay a dividend of $10 next year, determinethe maximum cash price that Hamlin should pay for each share of Craft.b. Discuss the use of the CAPM for estimating the value of common stock, anddescribe the effect on the resulting value of Craft of:(1) A decrease in its dividend growth rate of 3% from that exhibited over the19992003 period.(2) A decrease in its beta to 1. 10 points