How to Value Bonds 1. What is the present value of a 10-year‚ pure discount bond paying $1‚000 at maturity if the appropriate interest rate is: a. 5 percent? b. 10 percent? c. 15 percent? 2. Microhard has issued a bond with the following characteristics: Principal: $1‚000 Time to maturity: 20 years Coupon rate: 8 percent‚ compounded semiannually Semiannual payments Calculate the price of this bond if the stated annual
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The Gordon growth model‚ developed by Gordon and Shapiro‚ assumes that dividends grow indefinitely at a constant rate. Here‚ Vo = Value of the share r = Required rate of Return g = Dividend growth rate For our calculation we have taken‚ * Required Rate of return as Cost of Capital * Dividend growth rate as CAGR of last 8 yrs dividend rate * CAGR of Dividend (last 8 yrs) = 20.49 * Last dividend distributed = 110 Valuation as per Gordon’s Model = 1015.385 1015
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ratio.It may mislead some of investors to buy the stock . Apart from PE ratio‚ Dividend Discount Model (DDM) will be a better way to value the stock price. The DDM model seeks to value a stock by using predicted dividends and discounting them back to their present value. The Formula of DDM is Dividend per share over discount rate minus dividend growth rate. Value of Stock = D1 R- G Where‚ • DPS (1) = Dividends per
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Stock Valuation Problems Handout 1. ABC Company’s stock pays a fixed dividend of $2. If an investor’s required rate of return is 8%‚ then what is the value of the stock? $25 2. DEF Ltd. has stock outstanding that pays a fixed $5 dividend and currently markets for $22. What is the expected rate of return for the stock? 22.7% 3. GHI Inc.’s stock is selling for $33 in the market and pays a $3.60 annual dividend. a. If you purchase the stock at its current price‚ what will be the expected
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assumed market risk premium is assumed at being 7.5%. Information gathered from the XYZ Stock Information page (downloaded via IP assignment) reveals the following values: * XYZ’s beta (β) = 1.64 * XYZ’s current annual dividend = $0.80 * XYZ’s 3-year dividend growth rate (g) = 8.2% * Industry Price/Earnings (P/E) = 23.2 * XYZ’s Earnings Per Share (EPS) = $4.87 * U.S. 10-year Treasury bond (risk free rate) = 2.6% * Market Risk Premium = 7.5% 1. Using CAPM (Brooks
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and whether Nike creates value to its shareholders. This paper will analyze Nike’s capital structure‚ scope of international operations‚ recent stock performance‚ and dividend policy. We will examine how Nike’s international operations are conducted‚ its criticisms and strengths. Nike’s debt ratios‚ dividend payout ratios‚ dividend yield‚ and interest coverage ratios over the previous 5 years will be discussed and compared with industry benchmarks. Its bond ratings and the relation between the operating
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This article highlights that Felda Global Ventures Bhd (FGV) is indecisive on their dividend payments to their shareholders for 2016. At the same time‚ they have also announced a mutual separation scheme (MSS) which will affect 3 percent of its current workforce. A letter from Ms. Alice in The Star Online brings to light on what is actually a mutual separation scheme. She mentions how when preliminary economizing or cost-cutting methods fail to work‚ the final action to lessen heavy expenses is
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a marketing guy who understood the Ukrainian markets and had previous experience of marketing beer for a major Ukrainian beer producer. In the following report‚ we aim to evaluate the past and prospective financial performance of the company‚ dividend policy and to critique its liberal credit and inventory policies. An appropriate compensation scheme will also be recommended. Adoption of a Compensation Scheme for Oleg Pinchuk It is our belief that Oleg Pinchuk does deserve an increase in his
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4. | Objective | 5 | 5. | Company Address and Background | 6 | 6. | Ratio Analysis | 7 | 7. | Common Size Statements | 15 | 8. | Trend Analysis | 19 | 9. | Capital Structure | 24 | 10. | Weighted Average Cost of Capital | 26 | 11. | Dividend Policy | 29 | 12. | Working Capital Management | 31 | 13. | Bibliography | 34 | 1. Acknowledgement We would like to express the deepest appreciation to our subject lecturer for supervising and guiding us through the course of our report
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whether Wal-Mart is a good investment. Tools such as the dividend discount model‚ Price-earnings Model‚ and the application of the capital asset pricing model will be used to determine if Wal-Mart would be a smart investment at the given time. Using the Dividend Discount Model‚ or DDM‚ is one way to evaluate the worth of Wal-Marts stock. This model states that the current stock price represents the present value of all the expected future dividends discounted at the investors required rate of return
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