Josiah Trampolines, Inc. will soon be offering a new issue of corporate bonds. The issue will offer a coupon rate of 12.5% paid semi-annually and maturing in 30 years with a face value of $1,000. The yield on similar bonds in the market is currently 10%. Josiah recently paid $6.25 per share as a dividend and expects the dividends to grow indefinitely by 3.75%. Equity Investors demand a rate of return of 8.75% on the stock.

Using this information, decide if the following statements are true or false.

- To price the new bond issue of the firm, the appropriate time value of money concept to use would be to determine the total of the Present value of an annuity plus the Present value of one-time cash flow. T/F?

- To price the stock of the firm, the appropriate time value of money concept to use would be to determine the Future value of an annuity. T/F?