Question: a. What makes bonds sell at a premium, par value, or discount? b. Please show and describe the dividend discount model of common stock valuation.

a. What makes bonds sell at a premium, par value, or discount?

b. Please show and describe the dividend discount model of common stock valuation.

c. Are the costs of debt and equity observable in the capital markets? If not how do you estimate that cost of capital?

d. The expected annual cash flow on a restaurant is $300,000 (assume growth = 0%), and my cost of equity capital for restaurants if 33.3% (restaurants are very risky!). What is the maximum price I am willing to pay for that business?

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