Question:

Peking Duct Tape Company has outstanding a $1,000-face-value bond with a 14 percent coupon rate and 3 years remaining until final maturity. Interest payments are made semiannually. a. What value should you place on this bond if your nominal annual required rate of return is (i) 14 percent? (ii) 16 percent?

b. The Ghafoor Company paid $ 2 of dividends this year. If its dividends are expected to grow at a rate of 3 percent per year, what is the intrinsic value for Ghafoor common stock if the required rate of return is 10% and the life of the investment is 3 years and the market price expected after 3 years is $22?

Note: Kindly provide a detailed step by step process for each part with formulas clearly understandable, if done on paper would really appreciate it.