QUESTION

Suppose Kitten Mittens Inc. needs a large amount of capital to build a new factory. Charlie hires you as a financial consultant to determine how to raise the most capital at the lowest price. You recognize that Kitten Mittens is an unproven product and the project carries high default risk. However, there is a lot of upside because Americans spend more than $60 billion per year on their pets. What type of bond would you recommend Kitten Mittens Inc. to issue?

	A.	Floating Rate Bonds
	B.	Level Coupon Bonds
	C.	Yankee Bonds
	D.	Convertible Bonds

QUESTION

Kitten Mittens Inc. paid a $1 per share dividend in fiscal year 2015. At the end of 2015, you project 2% constant dividend growth rate indefinitely and decide to buy one share of stock on January 1st, 2016. (Hence you will recieve your first dividend payment on December 31st, 2016). How much money would you have been willing to pay for that share of stock if the required rate of return was 15% per year? (Do not include dollar signs or commas in your answer)

QUESTION

Suppose that Kitten Mittens Inc. currently pays a dividend of $2. The dividend is expected to grow at a rate of 8% for the next 3 years; then it will grow at 4% forever. The appropriate discount rate is 12%. What is the price of one share of Kitten Mittens stock? (Do not include dollar signs or commas in your answers)