Valuing stocks and bonds

1. Suppose you invest in a circulating bond with an annual coupon of 6% and a remaining maturity of 10 years. The bond has a face value of $ 900 and a market interest rate of 8%. Determine the payment you should make for the bonus. (4 points)

2. Mobile Motors Inc. bonds have 12 years remaining to maturity. The interest is paid annually, has a face value of $ 2,000, the coupon interest rate is 7% and an 11% yield to maturity. Determine the current price of the bond in the market. (4 points)

3. Cassidy Industries outstanding bonds have a face value of $ 800, a semi-annual coupon of 8%, 12 years to maturity, and a YTM of 10%. Determine the price of the bond. (4 points)

4. Suppose a bond has a face value of $ 3,000, 10 years to maturity, an annual coupon of 7%, and is selling for $ 2,800. Calculate Yield to Maturity (YTM). Calculate the price 4 years from now, assuming the yield to maturity remains constant. (8 points)

5. Suppose Roberto is considering a 12-year bond with a face value of $ 2,000 and a rate of 8% payable semi-annually. Calculate the payment Roberto would have to make if an "effective" annual interest rate of 8.2% were required. (4 points)

6. The River Industries company paid $ 2.00 in dividends per share. The dividend is expected to increase 10% annually for the next 4 years and 6% in the remaining years. Calculate the expected dividend per share for each of the 6 years. (6 points)

7. Corner Company is estimated to generate $ 18 million in available cash flow during the first year, and it is expected to grow at a constant rate of 5% per year. The company has no debt or preferred shares and its weighted average cost of capital (WACC) is 9%. Calculate the value per share, considering that the company has $ 32 million in outstanding shares. (4 points)

8. Calculate the nominal rate of return on a perpetual preferred share with a face value of $ 200, a dividend of 9% of the face value, and a current market price of $ 100. (4 points)

9. Rome Corporation invests in the research and development department and will pay no dividends for years to come. Venetian Industries is interested in acquiring shares in Rome Corporation. The Venetian CEO has estimated Rome's available cash flows for the next 3 years: $ 7 million, $ 9 million, and $ 12 million. After the third year, the available cash flow is expected to grow 5% steadily. Rome Corporation's weighted average cost of equity (WACC) is 7%, the market value of its debt and preferred shares total $ 60 million. Rome Corporation has $ 22 million of non-operating assets and 9 million common shares outstanding. (12 points)

to. Calculate the present value of the expected available cash flows for the next 3 years. (4 points)

b. Determine the market value of Rome Corporation's operations. (4 points)

c. Calculate an estimate of the price per share of Rome Corporation. (4 points)