Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following is information on Trimax Inc.'s debt and equity, income statement, and its comparable companies. --Bonds outstanding with 6 years remaining until maturity with

The following is information on Trimax Inc.'s debt and equity, income statement, and its comparable companies.

--Bonds outstanding with 6 years remaining until maturity with a current market price of $925, and a coupon rate of 7.5% that is paid annually

--The company's dividend payout ratio is 60%

--The dividend is expected to increase by 10.0% next year, 7.0% the following year, and then increase at a constant rate of 5.0% forever

--Investors require an annual return of 14.0% on the stock

--Shares outstanding of 200,000

--The current year income statement for Trimax is below

--Comparable company (Comp 1, Comp 2, Comp 3, and Comp 4) share price and financial information is below

1) What is the yield to maturity on Trimax's bonds?

2) What is the price per share of Trimax's stock using the dividend discount model?

3) If it is reasonable to value a share of Trimax's stock at the average P/E of the comparable companies, what value would result?

4) If Trimax has a higher expected growth rate than the comparable companies, should Trimax have a higher or lower P/E ratio than the comparable companies?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: E Thomas Garman, Raymond Forgue

11th Edition

1111531013, 9781111531010

More Books

Students also viewed these Finance questions

Question

6 . Which function deletes extra spaces at the end of a value?

Answered: 1 week ago

Question

The number of new ideas that emerge

Answered: 1 week ago

Question

Technology

Answered: 1 week ago