Brooks Industries (BI) issued a forty-year bond exactly fifteen years ago to finance the purchase of a positive NPV project that had an initial cost of $1 billion. BI has 9,000,000 outstanding shares of common stock that pays a current dividend of $1.20 per share.

Determine the current market price of the bond if the coupon rate is 8.7% and the yield to maturity is now 7.3%.

Describe the manner in which a ratings agency would assign credit default risk levels to the SEI bond.

Determine the market price of the common stock if BIs dividends are expected to grow by 5.2% and the required return on the common stock is 17.3%.

Allen Enterprises is a competitor of BI and does not pay a dividend. Explain how an investor could estimate the fair market price of Allen Ent using a well-developed financial theory.