• Pricing and regular and callable bond

Dooley, Inc., has outstanding $100 million bonds that pay an annual coupon rate of interest of 10.5 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 20 years. Because of Dooleys increased risk, investors now require a 14 percent rate of return on bonds of similar quality with 20 years remaining until maturity. The bonds are callable at 110 percent of par at the end of 10 years.

• What price would the bonds sell for assuming investors do not expect them to be called?
• What price would the bonds sell for assuming investors expected them to be called at the end of 10 years?

• Stock pricing with constant dividend or dividend with constant growth rate.

What is the current per-share value of JRM Corporation to an investor who require a 16% rate of return?

JRM current per-share dividend is $2 and is expected to remain at 2 for the foreseeable future?Whatisthepriceiftheper-sharedividendwillgrowat2%?

The Seneca Maintenance Company currently (that is, as of year 0) pays a common stock dividend of $1.5 per share. Dividend are expected to grow at a rate of 11% per year for the next 4 years and then continue growing thereafter at a rate of 5% per year. What is the current value of a share of Seneca common stock to an investor who require a 14% rate of return?

Hint:

Calculate the cash flow of the stock for year 1-4, and the terminal value at the end of year 4.What is the cash flow for year 1-4, including both dividend and terminal value?The stock price is calculated as the sum of the present value of the cash flows from year 1-4.