ps5 - FIN300 Managerial Finance Spring 2010 Professor H....

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FIN300 Managerial Finance Spring 2010 Professor H. Wang Problem Set #5 Due: Wednesday, March 17, 2010 Please make sure to write clearly the name and ID# of each member in the group. Please turn in your solutions at the beginning of the lecture on the due date. Late submissions or submissions by groups larger than four students will not be accepted. 1. a. If the market interest rate unexpectedly increases, what would be the effect on the prices of long-term bonds? Why? b. How would a rise in the interest rate affect the general level of stock prices? Why? 2. Scotto Manufacturing is a mature firm in the machine tool component industry. The firm’s most recent common stock dividend was $2.40 per share. Because of its maturity as well as its stable sales and earnings, the firm’s management feels that dividends will remain at the current level for the foreseeable future. a. If the required return is 12%, what will be the value of Scotto’s common stock? b.
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ps5 - FIN300 Managerial Finance Spring 2010 Professor H....

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