On January 31, 2022 you purchased a newly issued 5.6% coupon bond issued by the Dana Corporation
Question:
On January 31, 2022 you purchased a newly issued 5.6% coupon bond issued by the Dana Corporation for $1,023.56. The bond is noncallable and matures January 31, 2048. You decide to sell the bond April 30, 2023 when the bond’s yield to maturity was 4.82 percent. Based on a 30/360 day-count method, how much will you receive from the sale of the bond (including accrued interest)?
Consider the December 31, 2022 and 2021 balance sheet for the Jasper Company and the income statement for the year ended December 31, 2022:
JASPER COMPANY
Balance Sheets as of December 31, 2022 and 2021
Assets | ||
2022 | 2021 | |
Cash | $ 405 | $310 |
Accounts receivable | 3,055 | 2,640 |
Inventory | 3,850 | 3,275 |
Property, plant, and equipment (net) | 10,670 | 10,960 |
Total | $17,980 | $17,185 |
Liabilities and Stockholder’s Equity | ||
2022 | 2021 | |
Accounts payable | $ 2,570 | $ 2,720 |
Current portion of long-term debt payable | 0 | 100 |
Long-term debt | 8,100 | 7,875 |
Common stock | 5,250 | 5,000 |
Retained earnings | 2,060 | 1,490 |
Total | $17,980 | $17,185 |
JASPER COMPANY
2022 Income Statement
Sales | $9,610 |
Cost of goods sold | 6,310 |
Gross profit | 3,300 |
Depreciation expense | 1,370 |
Earnings before interest and taxes | 1,930 |
Interest expense | 630 |
Earnings before taxes | 1,300 |
Income tax expense | 455 |
Net income | $845 |
- Considering the left-hand side of the cash flow identity (cash flows from assets associated with investment activities), determine Jasper Company’s free cash flow (FCF) for the year 2022.
- Jasper Company has 1,000 shares of common stock outstanding. Under the assumption that FCF’s will grow by 2 percent into the foreseeable future, compute an estimate of the price per share based on FCF’s if investors require a 9 percent return.
- If Jasper’s current dividend is expected to grow at 5 percent into the foreseeable future, what would then be the estimated price per share?
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy