What makes bonds sell at a premium, par value, or discount? Please show and describe the dividend discount model of common stock valuation. Are the costs of debt and equity observable in the capital markets? If not how do you estimate that cost of capital? 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? What if the cash flow growth rate was 10%? A stock has a current dividend of $2.00, a forecasted growth rate of 10%, a beta = 2, market return = 12.4% and the risk-free rate (30 year US T-Bond YTM) = 4%. The current stock price on the NYSE is $15. What is the value of the stock and is the stock over- or under-valued?