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Unformatted text preview: (Assume the company chooses on the basis of after-tax returns.) (Points: 20) 3. (TCO D) Bond value - semiannual payment Assume that you wish to purchase a 25-year bond that has a maturity value of $1,000 and makes semiannual interest payments of $45. If you require a 7 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? (Points: 25) 4. (TCO E) Constant growth stock The last dividend paid by XYZ Company was $1.00. XYZs growth rate is expected to be a constant 5 percent. XYZ's required rate of return on equity (k s ) is 10 percent. What is the current price of XYZ's common stock? (Points: 25) 5. (TCO B, F) NPV As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: Cash Flows A B-$100,000-$125,000 1...
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- Spring '10