Stock valuation (60 points) 1. You invest in Louis Lane Company an expect the following stream of CFs: $300 in year 1 $475 in year 2 $250 in year 3 Starting year 4 you have some good reasons to expect your CFs to constantly grow at 5% forever and interest rate is 15% 1. What is the terminal value? 15 points 2. What is the value of this investment? 15 points Suppose that the company has 1000 outstanding shares. 3. What is the intrinsic value? 15 points You have heard there is an opportunity to buy stocks of this company at $3 per share. 4. Is it a good deal or not? why? 15 points Bond Valuation (40 points) 1. A$ 1,000 par value bond makes annual coupon payment of $95. If it offers a yield to maturity of 6.5% what is the price of the bond knowing that n is equal to ten (15 points) 2. Five years ago you purchased a corporate bond for $960 paying an annual coupon rate of 9%. At that time the YTM was 10% and there were 10 years left to maturity. Today, the YTM on your bond is 8%. What is the current price of your bond? (15 points) 3. YMCA Company's preferred stock pays a dividend of $12 per year. If the stock sells for $40 and the next dividend will be paid in one year, what return would you require for investing in this company? (10 points)