Intrinsic value of share

Problem1. Sanders, Inc., paid a $4 dividend per share last year and is expected to continue to pay out 60% of its earnings as dividends for the foreseeable future. If the firm is expected to generate a 13% return on equity in the future, and if you require a 15% return on the stock, what is the value of the stock?

Problem2. A firm is planning on paying its first dividend of $2 three years from today. After that, dividends are expected to grow at 6% per year indefinitely. The stock's required return is 14%. What is the intrinsic value of a share today?

. You purchase a bond for $875. It pays $80 a year (that is, the half yearly coupon is 4%), and the bond matures after 10 years. What is the yield to maturity?

Problem4. Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the given questions.

i) XY 5.25% (interest paid yearly) for 20 years AB 14% (interest paid yearly) for 20 years

ii) Which bond has a current yield that exceeds the yield to maturity?

iii) Which bond may you expect to be called? Why?

iv) If CD, Inc., has a bond with a 5.25% coupon and a maturity of 20 years but which was lower rated, what would be its price relative to the XY, Inc., bond? Explain.

Request for Solution File

Ask an Expert for Answer!!
Financial Accounting: Intrinsic value of share
Reference No:- TGS03391

Expected delivery within 24 Hoursrs

2015 ┬ęTutorsGlobe All rights reserved. TutorsGlobe Rated 4.8/5 based on 34139 reviews.