Question
An analyst has gathered the following information about ABC Corporation and the market: The required rate of return on equity (k e ) is 15%
An analyst has gathered the following information about ABC Corporation and the market:
The required rate of return on equity (ke) 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%.
What is the current market value (PV) of the bond per 1000 of par value?
Answer: ____[SCM1]
Identify if the bond is trading at a discount, at par or at a premium.
Answer: ____[SCM2]
What is the intrinsic value of the companys common stock (P0)? (10 minutes)
[SCM1]3 points
[SCM2]1 point
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