1. A company that is guaranteed to pay dividends can have a positive value. 2. Forecasting cash flows has no significant risks. 3. Discount rate is a synonym for coupon

1. A company that is guaranteed to pay dividends can have a positive value. 2. Forecasting cash flows has no significant risks. 3. Discount rate is a synonym for coupon rate. 4. Bond prices are inversely related to their time to maturity. 9. INXS Corporation, a maker of “ You Need”, just paid a dividend of $2.00.  The dividends have a constant growth rate of 10%.  The required rate of return on this firm is 16%.  is the intrinsic value of a share of this stock? 10. Bueller, Inc. has a 30 year bond that has existed for 10 years, a coupon rate of 10%, and a required rate of 10%.  Assuming a face value of $1000, what is the intrinsic value of the bond?  if the required rate was 6%?  if the required rate was 14%? 11. A new 10 year bond has a coupon rate of 25%.  The bond is nine years old and has a required rate of return of 10%.  The face value is $1000.  is the intrinsic value of the bond? 13. A potential project has the following expected cash flows. t              0         1          2          3          4          5 CF       -500     150      220      -80       360      100 Assuming a discount rate of 10% calculate Net Present Value, Payback, and Discounted Payback Formula Sheet PV*(1+r) FV/(1+r) * CF r * CF r CF/r D /(r-g)

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