Question
Can someone please works this out on excel format so that I can be able to understand what I am doing? Module 2 Extra Practice
Can someone please works this out on excel format so that I can be able to understand what I am doing?
Module 2 Extra Practice
1.Joe Bob is issuing a 20 year, 8% coupon bond. The market yield on this type of bond is 6%. Find a fair price. (1229.40)
2.If Joe Bobs bond immediately falls to a price 980, what is the yield? (8.2%)
3.Last year Timco paid a 5 per share dividend. The beta is 1.7, the market is expected to earn 11%, and the risk free rate is 2%. If dividends remain at 5 per year forever, what is a fair price? (28.90)
4.What if Timcos dividends grow at 6% per year forever? (46.90)
5.Find the dividend yield and capital gains yield for the stock in number 4. (.113 and .06)
6.What if Timcos dividends grow at 6% for one year, than at 10% forever after that? (72.60)
7.Stevie Ray can generate 3 in Eps per year forever. The fair return is 14%. They can retain 30% of earnings and invest in a project that will earn 12%. Find the value of assets in place. Find the value of the growth opportunity. Should Stevie Ray buy it? (21.43, -1.24, No)
8.The spot price is 100. The exercise price on a one year call is 95. The standard deviation of the spot is 20%. The risk free rate is 4%. Find the intrinsic value, time value and premium for this call. (5, 7.76, 12.76)
9.The spot price is 100. The exercise price on a one year call is 102. The risk free rate is 4%. Find the price of the call if there is equal probability that stock price will grow to 110 or fall to 95. (4.615)
10.Tomco uses a capital structure that is 60% debt. The interest rate on this debt is 6%. The tax rate is 40%. If Tomco has a beta of 1.2 and the market is expected to earn 10% and the risk free rate is 3%, what is Tomcos WACC? (.0672)
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