Public corporations have no fixed lifespan; as such, they are often viewed as entities that will pay dividends to their shareholders in perpetuity. Suppose a firm pays a dividend of $2 per share every year. If the discount rate is 12 percent, what is the present value of all the future dividends?
Answer to relevant QuestionsMary-Beth is planning to live in a university residence for four years while completing her degree. The annual cost for food and lodging is $5,800 and must be paid at the start of each school year. What is the total present ...Calculate the price of a bond with FV of $1,000, a coupon rate of 8 percent (paid semi-annually), and five years to maturity when:a. kb = 10 percentb. kb = 8 percentc. kb = 6 percentIt is now March 1, 2013, and Peter has just purchased a five-year U.S. government bond (FV = $1,000) with a quoted price of 93.863. This bond has a 5-percent coupon rate, and the last semi-annual coupon payment was made on ...Using the Fisher relationship, calculate the exact real interest rate and the approximate real rate, given a T-bill rate of 9 percent and an expected inflation rate of 4.5 percent.You are a financial advisor and one of your clients comes to you with a convertible bond that has a coupon rate of 8 percent. The market interest rate is 6 percent. The share price of the company that issued the bond is ...
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