What makes bonds sell at a premium, par value, or discount? Are the costs of debt and equity observable in the capital markets? If not how do you estimate that cost of capital? The expected annual cash flow on a business is $300,000 (assume growth = 0%), and the cost of equity is 33.3%. What is the maximum price you are willing to pay for that business? A stock has a current dividend of $2.00, a forecasted growth rate of 10%, a beta = 2, market return = 12.4% and the risk-free rate (30 year US T-Bond YTM) = 4%. The current stock price on the NYSE is $15. What is the value of the stock and is the stock over or undervalued? Please show and describe the dividend discount model of common stock valuation.