Yield to Maturity and Current Yield
You just purchased a bond that matures in 12 years. The bond hasa face value of $1,000 and has an 7% annual coupon. The bond has acurrent yield of 5.74%. What is the bond's yield to maturity? Roundyour answer to two decimal places.
Constant Growth Valuation
Boehm Incorporated is expected to pay a $3.80 per share dividendat the end of this year (i.e., D1 = $3.80). The dividendis expected to grow at a constant rate of 4% a year. The requiredrate of return on the stock, rs, is 19%. What is theestimated value per share of Boehm's stock? Round your answer tothe nearest cent.
Preferred Stock Valuation
Nick's Enchiladas Incorporated has preferred stock outstandingthat pays a dividend of $5 at the end of each year. The preferredsells for $50 a share. What is the stock's required rate of return(assume the market is in equilibrium with the required return equalto the expected return)? Round the answer to two decimalplaces.
Nonconstant Growth Valuation
A company currently pays a dividend of $1.75 per share(D0 = $1.75). It is estimated that the company'sdividend will grow at a rate of 18% per year for the next 2 years,and then at a constant rate of 8% thereafter. The company's stockhas a beta of 1.2, the risk-free rate is 5%, and the market riskpremium is 3%. What is your estimate of the stock's current price?Do not round intermediate calculations. Round your answer to thenearest cent.
