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# ADMS3530-Final-S07 - Name Section ID Prof Kings section C...

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32 Calculation Questions (2 marks each) 1. The common stock of Robin's Tools sells for \$24.50. The firm's beta is 1.2, the risk- free rate is 4%, and the return on the market portfolio is 12%. Next year's dividend is expected to be \$1.50. Assuming that dividend growth is expected to remain constant for Robin’s Tools over the foreseeable future, what is the firm's anticipated dividend growth rate? A) 6.65% B) 7.48% C) 9.15% D) 13.6% E) 15.0% 2. What is the yield to maturity on a 10-year zero-coupon bond with a \$1,000 face value selling at \$742? A) 3.03% B) 7.42% C) 13.48% D) 34.78 E) 42.37% 3. Consider the following monthly cash flows (see the diagram below): Cash flows of an amount X are made for months 1, 3, 5, …, 17 and 19 (the ten odd- numbered months) and cash flows of an amount Z are made for months 2, 4, 6, …, 18 and 20 (the ten even-numbered months). The APR is 6% and is compounded on a monthly basis. What is the present value of these cash flows today if X = \$2,000 and Z = - \$700? A) 12,311 B) 12,406 C) 25,569 D) 25,664 E) 32,955 Today 1 2 3 4 19 20 X Z X Z X Z
4. TD Bank’s earnings and dividends are expected to grow at a rate of 10% during the next 2 years, at 8% in the third year, and at a constant rate of 6% thereafter. If last dividend paid was \$2.00 and the required rate of return on its common stock is 12%. How much should you pay today for one share of TD Bank? A) \$19.31 B) \$24.66 C) \$38.62 D) \$51.93 E) \$55.41 5. Atkinson Co. will finance its expansion through additional bond sales. Its current outstanding bonds are selling for \$919.71. These have a 6% coupon rate, pay interest semi-annually and will mature in 12 years. What must the coupon rate of the new bonds be in order to sell the issue at par, if they will also mature in 12 years and pay semi-annual coupons? A)

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ADMS3530-Final-S07 - Name Section ID Prof Kings section C...

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