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Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end
Suppose there is a corporate bond. Its face value is $2000. And the maturity is 4 years. Its coupon is $10 issued at the end of each year. Its price is $1900 right now. The interest rates for bonds and stocks are 2% and 3%, respectively. The market price of stock of this company is $25 right now. And the shares outstanding is 25,000 shares. And the tax rate is 20%. The ratio of debt to equity is 0.2.
- Suppose the firm is going to repurchase some stocks now. It repurchased 5000 shares from the market at the current price. What is the stock price after the repurchase?
- Suppose the firm is going to split its stock. It is a 2-to-1 split. (a share becomes two.) It requires commission of $ 2000. What is the stock price afterwards?
- Suppose the firm issued cash dividend of $2 per share. What is the price afterwards?
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