eng111_discussion_week7_questions

eng111_discussion_week7_questions - stock cost today ANS Q4...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ENG 111 Discussion Week 7 Winter 2009 Q1. Stealers Wheel Software has 8.4 % coupon bonds on the market with 9 years to maturity. The bonds make semiannual payments and currently sell for 104 percent of par. What is the current yield on the bonds? The YMT? The effective annual yield? ANS: Q2. Petty Co. wants to issue new 20-year bonds for some projects. The company currently has 8 percent coupon bonds on the market that sell for $1095. It makes semiannual payments and matures in 20 years. What coupon rate should the company set on its new bonds if it wants them to sell them at par? ANS: Q3. Valuing preferred stock. Mark bank just issued some new preferred stock. The issue will pay a $9 annual dividend in perpetuity, beginning 6 years from now. If the market requires a 7% return on this investment, how much does a share of preferred
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: stock cost today? ANS: Q4. Consider two mutually exclusive new projects. Assume the discount rate is 15%. Project A takes an initial investment of 100000 at time 0. It will generate cash flow of 40000 per year in the next five years. The cash flow will be terminated at year 6. Project B takes initial investment of 30000 at time 0. The cash flow at year 1 is 20000. In each subsequent year, the cash flow will grow at 15% per year. The cash flow will be terminated at year 6. The investments and cash flows are shown in the following table. Year Porject A Project B 0 -100000 -30000 1 40000 20000 2 40000 23000 3 40000 26450 4 40000 30418 5 40000 34980 Compute their NPV, IRR, Incremental IRR, PI. ANS:...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern