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Bronco Asset Management You have finally landed your dream job as a financial analyst at Bronco Asset Management ( BAM ) . Sam Brown and

Bronco Asset Management
You have finally landed your dream job as a financial analyst at Bronco Asset Management (BAM). Sam Brown and Shawn Ted are senior Bronco Asset Management (BAM) vice presidents and co-directors of the company's pension fund management division. Brown is responsible for fixed-income securities (primarily bonds), and Ted is responsible for equity investments. A major new client, the California Faculty Association (CFA), has requested that BAM present an investment seminar to the faculty of the universities. Brown and Ted will make the presentation and ask you to help them with their topics.
Part I
Sam Brown remembered reading a Bloomberg News report on AT&T's largest $22.5 billion bond offering in July 2017. AT&T used the money to finance an $85.4 billion takeover of Time Warner Inc. Bonds, a form of long-term debt issued by companies needing financing for various reasons. Sam Brown was interested in understanding the process of bond issues and all the attributes included in the bond indenture.
A. Discuss the type of bonds companies could issue.
B. Discuss indenture and its covenants.
C. Discuss the relationship between bond prices and interest rates.
D. What is the difference between callable bonds and non-callable?
E. What is the value of a bond with an 8% coupon rate, ten years maturity, and market interest rates of 6%,8%, and 10%?
F. Which bonds appreciate or depreciate if the coupon rate changes to 6% or 10%?
G. Explain the implications of your answers in parts (E) and (F).
Part II
To present the concept and valuation of the common stock, Ted has asked you to analyze Apple Company (APPL) Inc., which designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. Specifically, Ted asked you to go over the following issues for him:
H. Describe the legal rights and privileges of common stockholders.
I. Explain the valuation process for stocks.
J. Using Apples dividend payment, beta, MRP of 6%, and risk-free rate of 4%, estimate the stock price based on the constant dividend growth model.
K. Using the multiperiod dividends model, estimate Apples stock price.
L. Using a multiperiod free cash flow model, estimate the enterprise value and stock price. Compare the estimated stock price to the market price and explain the price difference.
Growth Estimates Apple Year 2023
Current Qtr.11.20% Current Estimate EPS $6.59
Next Qtr.3.90% Payout Ratio 415.33%
Current Year 19.00% Diluted Average Shares 15,924,064
Next Year 8.50% Dividend per share (DPS) $1.01
Next 5 Years (per annum)6.14% Free Cash Flow $100,987,000
Past 5 Years (per annum)20.88% Long Term Debt $95,281
Forward Dividend & Yield $0.96(0.53%) Current Debt $15,807
Source: Yahoo. Finance Market Cap $286800
Growth Estimates AAPL
Current Qtr.11.20%
Next Qtr.3.90%
Current Year 19.00%
Next Year 8.50%
Next 5 Years (per annum)6.14%
Past 5 Years (per annum)20.88%
Source: Yahoo. Finance- Analysis
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