Corp Finance
TIME VALUE OF MONEY 1. You invested $1,000 at 4% compounded annually. How much interest was earned in year 5?
2. Gianni invested $10,000 at a rate of 6% compounded annually. How long will it take for the investment to grow to $40,000 3. What is the present value of an income stream which has a negative flow of $100 per year for each of the next 3 years, and a positive flow of $300 per year in years 4 through 7, if the appropriate discount rate is 10%?
BONDS
1. The current market price of McGill Corporation's 10 percent, 10 year bonds is $1,297.58. A 10 percent coupon interest rate is paid semiannually, and the par value is equal to $1,000. What is the YTM (stated on a nominal, or annual, basis) if the bonds mature 10 years from today?
2. A 6-year bond that pays 8 percent interest semiannually sells at par. Another 6-year bond of equal risk pays 8 percent interest annually. Both bonds are not callable. What is the price of the bond that play annual interest?
STOCKS
1. A company has just paid a dividend of $1.40 per share. Dividends are expected to grow at a rate of 5% per year for the foreseeable future. If the required return is 10%, what is the value of one share of the company’s stock.
2. Superior Enterprises has just paid a dividend of $1.05 and will pay $1.10 next year. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return if the stock is selling for $30 today?
3. Junkies Corporation has just paid a dividend of $0.90. Dividends are expected to grow at 20% for years one and two, 15% for years three and four, 10% for years five and six, and 5% thereafter. What is the expected dividend for year 10 if the required return is 18 percent?
4. The stock of SuperGrowth, Inc. just paid a dividend of $0.78. What is the expected capital gains yield if the stock is selling for $28.25 today and the required rate of return is 15 percent?
5. You purchase 500
2. Gianni invested $10,000 at a rate of 6% compounded annually. How long will it take for the investment to grow to $40,000 3. What is the present value of an income stream which has a negative flow of $100 per year for each of the next 3 years, and a positive flow of $300 per year in years 4 through 7, if the appropriate discount rate is 10%?
BONDS
1. The current market price of McGill Corporation's 10 percent, 10 year bonds is $1,297.58. A 10 percent coupon interest rate is paid semiannually, and the par value is equal to $1,000. What is the YTM (stated on a nominal, or annual, basis) if the bonds mature 10 years from today?
2. A 6-year bond that pays 8 percent interest semiannually sells at par. Another 6-year bond of equal risk pays 8 percent interest annually. Both bonds are not callable. What is the price of the bond that play annual interest?
STOCKS
1. A company has just paid a dividend of $1.40 per share. Dividends are expected to grow at a rate of 5% per year for the foreseeable future. If the required return is 10%, what is the value of one share of the company’s stock.
2. Superior Enterprises has just paid a dividend of $1.05 and will pay $1.10 next year. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return if the stock is selling for $30 today?
3. Junkies Corporation has just paid a dividend of $0.90. Dividends are expected to grow at 20% for years one and two, 15% for years three and four, 10% for years five and six, and 5% thereafter. What is the expected dividend for year 10 if the required return is 18 percent?
4. The stock of SuperGrowth, Inc. just paid a dividend of $0.78. What is the expected capital gains yield if the stock is selling for $28.25 today and the required rate of return is 15 percent?
5. You purchase 500