MGT$231-$ Corporate Finance

Assignment #$4-$ Chapters $8$ and $9$

Chapter $8$

The following questions should be answered in the $$Assignment$$ workbook. Avoid hardcoded values, and format appropriately.

Bond Yields Taylor Company has $6\mathrm{.}9$ percent coupon bonds on the market with $15$ years to maturity. The bonds make semiannual payments and currently sell for $103$ percent of par. What is the current yield on the bonds, the yield to maturity, and the effective annual yield?

Bond Yields Pelican Company wants to issue new $20-$year bonds for some much$-$needed expansion projects. The company currently has $6\mathrm{.}7$ percent coupon bonds on the market that sell for $$1,068,$ have a par value of $$1,000,$ make semiannual payments, and mature in $20$ years. What coupon rate should the company set on its new bonds if it wants them to sell at par?

Chapter $9$

The following questions should be answered in the $$Assignment$$ workbook. Avoid hardcoded values, and format appropriately.

Stock Valuation Finch Inc. just paid a dividend of $$4\mathrm{.}15$ per share of its stock. The dividends are expected to grow at a constant rate of $5\mathrm{.}5$ percent per year, indefinitely. Investors require a $15$ percent return on the stock for the first three years, a $13$ percent return for the next three years, and then an $11$ percent return thereafter. What is the current share price for the stock?

Nonconstant Growth Pelican Inc. is a young start$-$up company. No dividends will be paid on the stock over the next $9$ years because the firm needs to plow back its earnings to fuel their growth. The company will pay a dividend of $$16\mathrm{.}75$ per share in $10$ years and will increase the dividend by $3\mathrm{.}8$ percent per year thereafter. If the required return on this stock is $12$ percent, what is the current share price?