Problem
A company 'Millennium X' is expected to increase dividends by 20% in one year and by 15% in two years. After that dividends will increase at a rate of 5% per year indefinitely. If the last dividend was R10 and the required return is 20%, what is the price of 'Millennium X' stock? (10)
1.2. A company AXK Limited is considering selling an 8-year, 12% coupon bond with a par value of R10,000 on which interest is payable semi-annually. The required return on this bond is 14 %.
A. Calculate the value of the bond.
B. Will the AXK bond be selling at a premium or discount? Support your answer.
C. Explain the difference between a callable and non-callable bond.