Question: Question 2 . fonde compiled the following information for Core Corp. along with the financial statements found on the last page of this Quiz: Gare
Question 2 . fonde compiled the following information for Core Corp. along with the financial statements found on the last page of this Quiz: Gare Corp. has 25,000 coupon bonds outstanding in the marketplace. These bonds have a coupon rate of 5.50%, eight years to maturity and a yield to maturity of 6.15%. The firm's market capitalization is $47.50 min and it has 6.85 mln shares outstanding. The correlation coefficient between the returns on Core Corp. stock and the returns on the S&P/TSX Composite Index is 0.80. The returns of Core Corp. stock have a volatility of 22.50% while the volatility of market returns is 13.75%. The current Government of Canada 10-Year Benchmark Bond Yield is 2.15% while the expected market risk premium is 4.95% Core Corp.'s marginal tax rate is 27.50%. Determine Core Corp.'s intrinsic share price and the current share price premium or discount. Assume constant growth. [20 points] . Question 2 . fonde compiled the following information for Core Corp. along with the financial statements found on the last page of this Quiz: Gare Corp. has 25,000 coupon bonds outstanding in the marketplace. These bonds have a coupon rate of 5.50%, eight years to maturity and a yield to maturity of 6.15%. The firm's market capitalization is $47.50 min and it has 6.85 mln shares outstanding. The correlation coefficient between the returns on Core Corp. stock and the returns on the S&P/TSX Composite Index is 0.80. The returns of Core Corp. stock have a volatility of 22.50% while the volatility of market returns is 13.75%. The current Government of Canada 10-Year Benchmark Bond Yield is 2.15% while the expected market risk premium is 4.95% Core Corp.'s marginal tax rate is 27.50%. Determine Core Corp.'s intrinsic share price and the current share price premium or discount. Assume constant growth. [20 points]
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