Questions from Financial Management

Q: The market price is $900 for a 10-year bond

The market price is $900 for a 10-year bond ($1,000 par value) that pays 8 percent annual interest but makes interest payments on a semiannual basis (4 percent semiannually). What is the bond’s yield...

Q: A bond’s market price is $750. It has a $

A bond’s market price is $750. It has a $1,000 par value, will mature in 8 years, and has a coupon interest rate of 9 percent annual interest but makes its interest payments semiannually. What is the...

Q: A 20-year Fitzgerald bond pays 9 percent interest annually on

A 20-year Fitzgerald bond pays 9 percent interest annually on a $1,000 par value. If the bond sells at $945, what is the bond’s yield to maturity? What would be the yield to maturity if the bond paid...

Q: If Pepperdine, Inc.’s return on equity is 16 percent

If Pepperdine, Inc.’s return on equity is 16 percent and the management plans to retain 60 percent of earnings for investment purposes, what will be the firm’s growth rate?

Q: Tyrion L.’s Gadgets Inc. is trying to decide whether

Tyrion L.’s Gadgets Inc. is trying to decide whether to cut its expected dividends for next year from $8 per share to $5 per share in order to have more money to invest in new projects. If it does not...

Q: Duncan Motors is introducing a new product that it expects will increase

Duncan Motors is introducing a new product that it expects will increase its net operating income by $300,000. The company has a 34 percent marginal tax rate. This project will also produce $50,000 of...

Q: Dubai Metro’s stock price was at $100 per share when it

Dubai Metro’s stock price was at $100 per share when it announced that it would cut its dividends for next year from $10 per share to $6 per share, with the additional funds to be used for expansion....

Q: Using the P/E ratio approach to valuation, calculate the

Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • The investor’s required rate of return is 12 percent. • The expected level of earni...

Q: Assume the following: • The investor’s required rate of return

Assume the following: • The investor’s required rate of return is 13.5 percent. • The expected level of earnings at the end of this year (E1) is $6.00. • The retention ratio is 50 percent. • The retur...

Q: Assume the following: • The investor’s required rate of return

Assume the following: • The investor’s required rate of return is 15 percent. • The expected level of earnings at the end of this year (E1) is $5.00. • The retention ratio is 50 percent. • The return...