Must be completed in Excel
2. Assume that a bond will make payments every six months as shown on the following timeline
0 1 2 3 20
$20 $20 $20 20+$1000
a. What is the maturity of the bond (in years)?
b. What is the coupon rate (in percent)?
c. What is the face value?
4. Suppose the current zero-coupon yield curve for risk-free bonds is as follows:
Maturity (years) 1 2 3 4 5
YTM 5.00% 5.50% 5.75% 5.95% 6.05%
a. What is the price per $100 face value of a two-year, zero-coupon, risk-free bond?
b. What is the price per $100 face value of a four-year, zero-coupon, risk-free bond?
c. What is the risk-free interest rate for a five-year maturity?
6. Suppose a 10-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading for
a price of $1034.74.
a. What is the bond’s yield to maturity (expressed as an APR with semiannual compounding)?
b. If the bond’s yield to maturity changes to 9% APR, what will the bond’s price be?
7. Suppose a five-year, $1000 bond with annual coupons has a price of $900 and a yield to maturity
of 6%. What is the bond’s coupon rate?
11. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity,
a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity
on this bond when it was issued was 6%.
a. What was the price of this bond when it was issued?
b. Assuming the yield to maturity remains constant, what is the price of the bond immediately
before it makes its first coupon payment?
c. Assuming the yield to maturity remains constant, what is the price of the bond immediately
after it makes its first coupon payment?
13. Consider the following bonds:
Bond Coupon Rate (annual payments) Maturity (years)
A 0% 15
B 0% 10
C 4% 15
D 8% 10
a. What is the percentage change in the price of each bond if its yield to maturity falls from 6%
b. Which of the bonds A–D is most sensitive to a 1% drop in interest rates from 6% to 5% and
why? Which bond is least sensitive? Provide an intuitive explanation for your answer.
3. Suppose Acap Corporation will pay a dividend of $2.80 per share at the end of this year and $3
per share next year. You expect Acap’s stock price to be $52 in two years. If Acap’s equity cost of
capital is 10%:
a. What price would you be willing to pay for a share of Acap stock today, if you planned to
hold the stock for two years?
b. Suppose instead you plan to hold the stock for one year. What price would you expect to be
able to sell a share of Acap stock for in one year?
c. Given your answer in part (b), what price would you be willing to pay for a share of Acap
stock today, if you planned to hold the stock for one year? How does this compare to your
answer in part (a)?
5. NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay
this dividend forever. What is the price per share if its equity cost of capital is 15% per year?
6. Summit Systems will pay a dividend of $1.50 this year. If you expect Summit’s dividend to grow
by 6% per year, what is its price per share if its equity cost of capital is 11%?
12. Procter & Gamble will pay an annual dividend of $0.65 one year from now. Analysts expect
this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level
off at 2% per year. According to the dividend-discount model, what is the value of a share of
Procter & Gamble stock if the firm’s equity cost of capital is 8%?
17. Maynard Steel plans to pay a dividend of $3 this year. The company has an expected earnings
growth rate of 4% per year and an equity cost of capital of 10%.
a. Assuming Maynard’s dividend payout rate and expected growth rate remains constant, and
Maynard does not issue or repurchase shares, estimate Maynard’s share price.
b. Suppose Maynard decides to pay a dividend of $1 this year and use the remaining $2
per share to repurchase shares. If Maynard’s total payout rate remains constant, estimate
Maynard’s share price.
c. If Maynard maintains the dividend and total payout rate given in part (b), at what rate are
Maynard’s dividends and earnings per share expected to grow?
21. Sora Industries has 60 million outstanding shares, $120 million in debt, $40 million in cash,
and the following projected free cash flow for the next four years::
Year 0 1 2 3 4
Earnings and FCF Forecast ($ millions)
1 Sales 433.0 468.0 516.0 547.0 574.3
2 Growth versus prior year 8.1% 10.3% 6.0% 5.0%
3 Cost of Goods Sold (313.6) (345.7) (366.5) (384.8)
4 Gross Profit 154.4 170.3 180.5 189.5
5 Selling, General and Administrative (93.6) (103.2) (109.4) (114.9)
6 Depreciation (7.0) (7.5) (9.0) (9.5)
7 EBIT 53.8 59.6 62.1 65.2
8 Less: Income Tax at 40% (21.5) (23.8) (24.8) (26.1)
9 Plus: Depreciation 7.0 7.5 9.0 9.5
10 Less: Capital Expenditures (7.7) (10.0) (9.9) (10.4)
11 Less: Increase in NWC (6.3) (8.6) (5.6) (4.9)
12 Free Cash Flow 25.3 24.6 30.8 33.3
24. You notice that PepsiCo (PEP) has a stock price of $72.62 and EPS of $3.80. Its competitor,
the Coca-Cola Company (KO), has EPS of $1.89. Estimate the value of a share of Coca-Cola
stock using only this data.
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.