Question
Hi, can anyone help with all or some of these questions? They are basic financial calculations. Thank you! 1. The outstanding bonds of Winter Time
Hi, can anyone help with all or some of these questions? They are basic financial calculations. Thank you!
1. The outstanding bonds of Winter Time Products provide a real rate of return of 3.03 percent. The current rate of inflation is 4.68 percent. What is the actual nominal rate of return on these bonds?
2. A bond that pays interest annually yielded 7.47 percent last year. The inflation rate for the same period was 6.10 percent. What was the real rate of return on this bond for last year?
3. You have won a contest and will receive cash flows of $2,500 a year in real terms for the next 3 years. Each payment will be received at the end of the period with the first payment occurring one year from today. The relevant nominal discount rate is 6.3 percent and the inflation rate is 4.5 percent.
What are your winnings worth today?
What are the actual cash flows that you will receive (i.e., nominal cash flows)?
What are your nominal cash flows worth today?
4. Chelsea Fashions is expected to pay an annual dividend of $0.80 a share next year. The market price of the stock is $22.40 and the growth rate is 5 percent. What is the firm's cost of equity?
5. Southern Home Cookin' just paid its annual dividend of $0.65 a share. The stock has a market price of $13 and a beta of 1.12. The return on the U.S. Treasury bill is 2.5 percent and the market risk premium is 6.8 percent. What is the cost of equity?
6. Wind Power Systems has 20-year, semi-annual bonds outstanding with a 5 percent coupon. The face amount of each bond is $1,000. These bonds are currently selling for 114 percent of face value. The firm has a 34% tax rate.
What is the company's pre-tax cost of debt?
Its after-tax cost of debt?
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