. assume that a bond will make payments every six months as shown on


 

Shellie Brady

 

Managerial Finance

 

Must be completed in Excel

 

 

 

Chapter 6

 

2. Assume that a fetter allure create reimbursements every six months as shown on the forthcoming timeline

 

(using six-month periods):

 

0          1                     2                      3                      20

 

$20                   $20                  $20                   20+$1000

 

 

 

a. What is the ripeness of the fetter (in years)?

 

b. What is the coupon admonish (in percent)?

 

c. What is the countenance appraise?

 

4. Suppose the general zero-coupon allow incurvation for risk-unimpeded fetters is as follows:

 

Maturity (years) 1                     2                     3                      4                      5

 

YTM                             5.00%              5.50%              5.75%               5.95%               6.05%

 

a. What is the appraisement per $100 countenance appraise of a two-year, zero-coupon, risk-unimpeded fetter?

 

b. What is the appraisement per $100 countenance appraise of a indelicate-year, zero-coupon, risk-unimpeded fetter?

 

c. What is the risk-unimpeded cause admonish for a five-year ripeness?

 

6. Suppose a 10-year, $1000 fetter delay an 8% coupon admonish and semiannual coupons is trading for

 

a appraisement of $1034.74.

 

a. What is the fetter’s allow to ripeness (explicit as an APR delay semiannual compounding)?

 

b. If the fetter’s allow to ripeness qualifys to 9% APR, what allure the fetter’s appraisement be?

 

7. Suppose a five-year, $1000 fetter delay annual coupons has a appraisement of $900 and a allow to ripeness

 

of 6%. What is the fetter’s coupon admonish?

 

11. Suppose that General Motors Acceptance Corporation progenyd a fetter delay 10 years until ripeness,

 

a countenance appraise of $1000, and a coupon admonish of 7% (annual reimbursements). The allow to ripeness

 

on this fetter when it was progenyd was 6%.

 

a. What was the appraisement of this fetter when it was progenyd?

 

b. Assuming the allow to ripeness dregs invariable, what is the appraisement of the fetter immediately

 

before it creates its primeval coupon reimbursement?

 

c. Assuming the allow to ripeness dregs invariable, what is the appraisement of the fetter immediately

 

after it creates its primeval coupon reimbursement?

 

13. Consider the forthcoming fetters:

 

Bond                Coupon Admonish (annual reimbursements)          Maturity (years)

 

A                                  0%                                                       15

 

B                                  0%                                                       10

 

C                                  4%                                                       15

 

D                                  8%                                                       10

 

a. What is the percentage qualify in the appraisement of each fetter if its allow to ripeness falls from 6%

 

to 5%?

 

b. Which of the fetters A–D is most impressible to a 1% ooze in cause admonishs from 6% to 5% and

 

why? Which fetter is smallest impressible? Provide an voluntary sense for your tally.

 

 

 

 

 

 

 

Chapter 9

 

3. Suppose Acap Corporation allure pay a dividend of $2.80 per distribute at the end of this year and $3

 

per distribute instant year. You await Acap’s store appraisement to be $52 in two years. If Acap’s equity absorb of

 

principal is 10%:

 

a. What appraisement would you be allureing to pay for a distribute of Acap store today, if you calculated to

 

dwell the store for two years?

 

b. Suppose instead you drawing to dwell the store for one year. What appraisement would you await to be

 

able to hawk a distribute of Acap store for in one year?

 

c. Given your tally in divorce (b), what appraisement would you be allureing to pay for a distribute of Acap

 

store today, if you calculated to dwell the store for one year? How does this parallel to your

 

tally in divorce (a)?

 

5. NoGrowth Corporation generally pays a dividend of $2 per year, and it allure live to pay

 

this dividend eternally. What is the appraisement per distribute if its equity absorb of principal is 15% per year?

 

6. Summit Systems allure pay a dividend of $1.50 this year. If you await Summit’s dividend to accrue

 

by 6% per year, what is its appraisement per distribute if its equity absorb of principal is 11%?

 

12. Procter & Gamble allure pay an annual dividend of $0.65 one year from now. Analysts await

 

this dividend to accrue at 12% per year thereafter until the fifth year. After then, accrueth allure level

 

off at 2% per year. According to the dividend-discount type, what is the appraise of a distribute of

 

Procter & Gamble store if the firm’s equity absorb of principal is 8%?

 

17. Maynard Steel drawings to pay a dividend of $3 this year. The order has an awaited hues

 

development admonish of 4% per year and an equity absorb of principal of 10%.

 

a. Assuming Maynard’s dividend payout admonish and awaited accrueth admonish dregs invariable, and

 

Maynard does not progeny or discharge distributes, judge Maynard’s distribute appraisement.

 

b. Suppose Maynard decides to pay a dividend of $1 this year and use the cherishing $2

 

per distribute to discharge distributes. If Maynard’s aggregate payout admonish dregs invariable, judge

 

Maynard’s distribute appraisement.

 

c. If Maynard maintains the dividend and aggregate payout admonish absorbed in divorce (b), at what admonish are

 

Maynard’s dividends and hues per distribute awaited to accrue?

 

21. Sora Industries has 60 pet ungathered distributes, $120 pet in score, $40 pet in currency,

 

and the forthcoming designed unimpeded currency run for the instant indelicate years::

 

Year       0                              1              2              3              4

 

Earnings and FCF Forecast ($ pets)

 

1 Sales                                                                  433.0                      468.0      516.0      547.0      574.3

 

2     Growth versus precedent year                                                         8.1%       10.3%     6.0%       5.0%

 

3  Cost of Goods Sold                                                                       (313.6)   (345.7)   (366.5)   (384.8)

 

4  Gross Profit                                                                                     154.4      170.3      180.5      189.5

 

5  Selling, General and Administrative                                         (93.6)     (103.2)   (109.4)   (114.9)

 

6  Depreciation                                                                                   (7.0)        (7.5)        (9.0)        (9.5)

 

7  EBIT                                                                                                   53.8        59.6        62.1        65.2

 

8  Less:  Income Tax at 40%                                                           (21.5)     (23.8)     (24.8)     (26.1)

 

9  Plus: Depreciation                                                                         7.0          7.5          9.0          9.5

 

10 Less:  Capital Expenditures                                                      (7.7)        (10.0)     (9.9)        (10.4)

 

11 Less:  Increase in NWC                                                              (6.3)        (8.6)        (5.6)        (4.9)

 

12   Free Currency Run                                                                           25.3        24.6        30.8        33.3

 

 

 

24. You mention that PepsiCo (PEP) has a store appraisement of $72.62 and EPS of $3.80. Its opponent,

 

the Coca-Cola Order (KO), has EPS of $1.89. Judge the appraise of a distribute of Coca-Cola

 

store using simply this basis.