Josiah Trampolines, Inc. will soon be offering a new issue of corporate bonds. The issue will offer
Question:
Josiah Trampolines, Inc. will soon be offering a new issue of corporate bonds. The issue will offer a coupon rate of 12.5% paid semi-annually and maturing in 30 years with a face value of $1,000. The yield on similar bonds in the market is currently 10%. Josiah recently paid $6.25 per share as a dividend and expects the dividends to grow indefinitely by 3.75%. Equity Investors demand a rate of return of 8.75% on the stock.
To price the new bond issue of the firm, the appropriate time value of money concept to use would be to determine the total of the Present value of an annuity plus the Present value of one-time cash flow. True or False
To price the stock of the firm, the appropriate time value of money concept to use would be to determine the Future value of an annuity. True or False
Based on the information provided above, what will be the price of the bond?
Josiah Trampolines, Inc. will soon be offering a new issue of corporate bonds. The issue will offer a coupon rate of 12.5% paid semi-annually and maturing in 30 years with a face value of $1,000. The yield on similar bonds in the market is currently 10%. Josiah recently paid $6.25 per share as a dividend and expects the dividends to grow indefinitely by 3.75%. Equity Investors demand a rate of return of 8.75% on the stock.
Based on the information provided above, what will be the price of the bond?
$1,236.62
$2,152.93
$626.23
$2,419.70
None of the answers provided is correct.
Based on the information provided above, what will be the price of the stock
Josiah Trampolines, Inc. will soon be offering a new issue of corporate bonds. The issue will offer a coupon rate of 12.5% paid semi-annually and maturing in 30 years with a face value of $1,000. The yield on similar bonds in the market is currently 10%. Josiah recently paid $6.25 per share as a dividend and expects the dividends to grow indefinitely by 3.75%. Equity Investors demand a rate of return of 8.75% on the stock.
Based on the information provided above, what will be the price of the stock
125
129.69
-74.12
71.42
None of the answers provided is correct.
Expert Answer:
