INTRODUCTION - The Swan Davis Corporation case focuses on following issues: The importance in bond and stock valuation; The capital structure of the company; and How they effects to the capital budgeting decisions of the company. - Swan- Davis Inc.‚ (SDI) manufactures equipment for sale to large contractors‚ the company was found in 1976 and it went to the public in 1980 at its shares value risen from $1 to $15 since it enter to the market. - The financial statements for the past three years
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perpetual bond is currently selling for RS. 95/-. The coupon rate of interest is 13.5%. The approximate discount rate is 15%. The value of the bond and the YTM is: (a) Rs. 90/- and 14.2% Value is (13.5*15%=90) and YTM is ((13.5/95)*100=14.21%) (b) Rs. 100/- and 13.5% (c) Rs. 90 and 15% (d) Rs. 90/- and 13.5% 902. In 2001‚ Meridian Ltd. has issued bonds of Rs. 10‚000/-each due in 2011 with a 14% per annum coupon rate payable at the end of each year during the life of the bond. If the required
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Using present value to value bonds A bond‚ from the perspective of the person issuing the bond is a form of long term debt. In the hands of the person who has acquired the bond it is an asset. The agency issuing the bond agrees to pay a fixed sum of money to the holder of the bond for a period of years and then‚ at the end of that period‚ to pay back the face value of the bond. Bonds can be issued by a variety of agencies/companies: 1. Municipal bonds: issued by cities‚ states and
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CONTENTS Introduction of bonds……………………………………………..01 Characteristics of Bonds…………………………………………01 Types of Bonds…………………………………………………… 06 Bonds Market……………………………………………………… 08 Introduction of Pakistan bond market……………...................08 How Bonds Trade……………………………………………….….09 Bond Price Variations……………………………………………..09 Bond valuation…………………………………………..................09 Types of bonds trade in Pakistan……………………………….10 Government Debt Securities……………………………………..10 Characteristics of MTBs and PIBs………………………………12
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REG. NO: 2010-04-03894. 12 FINANCE 202 INDIVIDUAL ASSIGNMENT UDBS Consider a 10 year bond that has a face value shs 1000‚ a coupon rate of 6% and pays interest once a year. (a)Suppose person A bought this bond at par when it was initially issued and sold it 1 year later to person B for shs 1024.What is B’s total return? Soln Total return =[ Interest paid +(selling price – buying price)]/buying price Given; Annual interest paid = coupon rate x par value‚ coupon rate = 6%‚ par value =1000
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cash dividends of $160‚000 and thereafter declared and issued a 5% common stock dividend when the market value was $2 per share. Trent’s net income for 2010 was $360‚000. What is the balance in Agee’s investment account at the end of 2010 Cost $500‚000 Share of net income (.25 × $360‚000) 90‚000 Share of dividends (.25 × $160‚000) (40‚000) Balance in investment account $550‚000 2)During 2008‚ PK Co. purchased 2‚000‚ $1‚000‚ 9% bonds. The carrying value of the bonds at December
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High Mountain To: David Rogers From: JMSB Analysis Group Date: December 2009 Group members: Jun Gao Jiaqi Yin Qing Zhang Antoine Vulcain Main issues: Evaluation of two possible products: 1. NPV of two possible products 2. WACC analysis --CPAM --Bond yield plus Recommendation: Product B(aircraft) will be suggested due to the situation of the company. ---If there are enough funds for the company
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Bond P is a premium bond with a 12 percent coupon. Bond D is a 6 percent coupon bond currently selling at a discount. Both bonds make annual payments‚ have a YTM of 9 percent‚ and have five years to maturity. The current yield for Bonds P and D is percent and percent‚ respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g.‚ 32.16)) | If interest rates remain unchanged‚ the expected capital gains yield over the next year for Bonds P and D is percent
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BONDS Bonds pay fixed coupon (interest) payments at fixed intervals (usually every six months) and pay the par value at maturity. Par value = $1‚000 Coupon = 6.5% or par value per year‚ or $65 per year ($32.50 every six months). Maturity = 28 years (matures in 2032). Issued by AT&T. Types of Bonds Debentures - unsecured bonds. Subordinated debentures - unsecured “junior” debt. Mortgage bonds - secured bonds. Zeros - bonds that pay only par value at maturity; no coupons. Junk bonds - speculative or
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stocks and bonds which can be a sign of the company’s financial standing in a market. Since investors are risk averse and they would not like to put their money on stocks and bonds of a struggling company‚ but they would like to put their money on stocks and bonds of a stable and a progressing company. Investors benefit from company’s profit in the form of dividend when they buy a company’s stocks and investors can get higher or lower yield based on the bonds. This is the rationale behind bonds’ and stocks’
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