Problem
A. Define intrinsic value. What is the determinant of the discount rate in this model?
B. What three securities (discussed in class]: share the same valuation formula? Why?
C. HCSH has the following bond outstanding: coupon rate = 5%, years to maturity = 3 years; A similar caliber bond's YTM = 7%. What should be this bond's intrinsic value?
D. HCSH has the following preferred stock outstanding: dividend 6%; RRR = 1%. What's the maximum you will pay for this PS?
E. HCSH's common stock has just paid $1.00 in dividend. 9 years ago, it paid $.5 in dividends. The same growth rate is expected to continue for a long time. If the RRR on this stock is 12%. what is the intrinsic value? If this is also the equilibrium price. what is the market price of this stock?