26- Disney Enterprises issued 7.55% senior debentures (bonds) on July 15, 1993, with a 100-year maturity (that is, due on July 15, 2093). Suppose an investor purchased one of these bonds on July 15, 2003 for $1,050. a. Determine the yield-to-maturity (nearest of 1 percent) using the valuation formula for a bond with a finite maturity (Equation 6.5). b. Determine the yield-to-maturity (nearest of 1 percent) using the valuation formula for a perpetual bond (Equation 6.8). c. Explain why the answers to parts a and b are the same.

19- Zheng Enterprises, a multinational drug company specializing in Chinese medi- cines, issued $100 million of 15 percent coupon rate bonds in January 2009. The bonds had an initial maturity of 30 years. The bonds were sold at par and were call- able in five years at 110 (that is, 110 percent of par value). It is now January 2014, and interest rates have declined such that bonds of equivalent remaining maturity now sell to yield 11 percent. How much would you be willing to pay for one of these bonds today? Why?

•18. World Tobacco has issued preferred stock ($10 par value) that pays an annual divi- dend of $0.84. The preferred stock matures in 5 years. At that time, holders of the stock will receive, at their option, either $10 or one share of common stock with a value up to $14. If the common stock is trading at a price above $14, the preferred stockholders will receive a fractional share of common stock worth $14. The current common stock price is $8.875. The common stock pays a 10 cent per share divi- dend. This dividend is expected to grow at a 10 percent rate per year for the next 5years.Ifthemarketrequiresa12percentrateofreturnonastockofthisrisk and maturity, what is the maximum value for which this share can be expected to trade?

15-Dooley, Inc., has outstanding $100 million (par value) bonds that pay an annual coupon rate of interest of 10.5 percent. Par value of each bond is $1,000. The bonds are scheduled to mature in 20 years. Because of Dooley’s increasedrisk, investors now require a 14 percent rate of return on bonds of similar quality with 20 years remaining until maturity. The bonds are callable at 110 percent of par at the end of 10 years. •a. What price would the bonds sell for assuming investors do not expect them to be called? b. What price would the bonds sell for assuming investors expect them to be called at the end of 10 years?

11- Determine the value of a share of DuPont Series A $4.50 cumulative preferred stock, no par, to an investor who requires a 9 percent rate of return on this security. The issue is callable at $120 per share plus accrued dividends. However, the issue is not expected to be called at any time in the foreseeable future.

•8. If you purchase a zero coupon bond today for $225 and it matures at $1,000 in 11 years, what rate of return will you earn on that bond (to the nearest of 1 percent)?

•4. Creative Financing, Inc., is planning to offer a $1,000 par value 15-year maturity bond with a coupon interest rate that changes every 5 years. The coupon rate for the first 5 years is 10 percent, 10.75 percent for the next 5 years, and 11.5 percent for the final 5 years. If you require an 11 percent rate of return on a bond of this quality and maturity, what is the maximum price you would pay for the bond? (Assume interest is paid annually at the end of each year.)

3- 3. Consider Fulton Manufacturing Company’s 8¾percentbondsthatmatureonApril15, 2026. Assume that the interest on these bonds is paid and compounded annually. Deter- mine the value of a $1,000 denomination Fulton bond as of April 15, 2014, to an investor who holds the bond until maturity and whose required rate of return is •a. 7 percent b. 9 percent c. 11 percent. What would be the value of the Fulton bonds at an 8 percent required rate of return if the interest were paid and compounded semiannually?

Do you want your assignment written by the best essay experts? Then look no further. Our teams of experienced writers are on standby to deliver to you a quality written paper as per your specified instructions. Order now, and enjoy an amazing discount!!
find the cost of your paper
Is this question part of your assignment?
Place order
Posted on May 2, 2016Author TutorCategories Question, Questions