Question
show all work a) Bavarian Sausages enterprise value is $75,000,000, the market value of its debt is $23,000,000 and the market value of its preferred
show all work
a) Bavarian Sausages enterprise value is $75,000,000, the market value of its debt is $23,000,000 and the market value of its preferred stock is $5,000,000. If the company has 3,500,000 shares outstanding, what should be Bavarian Sausages stock price?
b) A one-year bond offers a yield of 6% and a two year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond next year?
c) You buy a house for $220,000 in a neighborhood where home prices have risen 5% annually on average. You suspect that growth in home prices will slow to an average of 3.5% per year over the next five years. If your growth estimate of 3.5% growth is correct, how much less will your house be worth in five years compared with 5% growth?
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