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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 codirectors of the company's pension fund management division. Brown is responsible for fixedincome 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&Ts largest $ billion bond offering in July AT&T used the money to finance an $ billion takeover of Time Warner Inc. Bonds, a form of longterm 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 noncallable?
E What is the value of a bond with an coupon rate, ten years maturity, and market interest rates of and
F Which bonds appreciate or depreciate if the coupon rate changes to or
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 and riskfree rate of 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
Current Qtr Current Estimate EPS $
Next Qtr Payout Ratio
Current Year Diluted Average Shares
Next Year Dividend per share DPS $
Next Years per annum Free Cash Flow $
Past Years per annum Long Term Debt $
Forward Dividend & Yield $ Current Debt $
Source: Yahoo. Finance Market Cap $
Growth Estimates AAPL
Current Qtr
Next Qtr
Current Year
Next Year
Next Years per annum
Past Years per annum
Source: Yahoo. Finance Analysis
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