# Question: Review problem time value of money applications Use the appropriate factors

Review problem-time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions.

Required:

a. Spencer Co.'s common stock is expected to have a dividend of $10 per share for each of the next eight years, and it is estimated that the market value per share will be $92 at the end of eight years. If an investor requires a return on investment of 10%, what is the maximum price the investor would be willing to pay for a share of Spencer Co. common stock today?

b. Mario bought a bond with a face amount of $1,000, a stated interest rate of 7%, and a maturity date 10 years in the future for $985. The bond pays interest on an annual basis. Three years have gone by and the market interest rate is now 6%.

What is the market value of the bond today?

c. Alexis purchased a U.S. Series EE savings bond for $75, and six years later received $106.38 when the bond was redeemed. What average annual return on investment did Alexis earn over the six years?

Required:

a. Spencer Co.'s common stock is expected to have a dividend of $10 per share for each of the next eight years, and it is estimated that the market value per share will be $92 at the end of eight years. If an investor requires a return on investment of 10%, what is the maximum price the investor would be willing to pay for a share of Spencer Co. common stock today?

b. Mario bought a bond with a face amount of $1,000, a stated interest rate of 7%, and a maturity date 10 years in the future for $985. The bond pays interest on an annual basis. Three years have gone by and the market interest rate is now 6%.

What is the market value of the bond today?

c. Alexis purchased a U.S. Series EE savings bond for $75, and six years later received $106.38 when the bond was redeemed. What average annual return on investment did Alexis earn over the six years?

**View Solution:**## Answer to relevant Questions

A task force of capital budgeting analysts at Morrison Ltd. collected the following data concerning the drilling and production of known petroleum reserves at an offshore location: Investment in rigging equipment and ...Calculate NPV—rank projects using present value ratios. The following capital expenditure projects have been proposed for management’s consideration at Scott, Inc., for the upcoming budget year:Required:a. Calculate the ...Direct material variances In addition to the information for Acme Company in Mini-Exercises 15.1 and 15.2, the standard direct material cost per unit consists of 10 pounds of raw material at $0.80 per pound. During August, ...Founders State Bank developed a standard for teller staffing that provided for one teller to handle 12 customers per hour. During June, the bank averaged 50 customers per hour and had five tellers on duty at all times. ...In addition to the information presented in Mini Exercises 14.1 and 14.2, ABC Company currently pays a standard rate of $1 per pound for raw materials. Each unit should be produced in 15 minutes of direct labor time at a ...Post your question