Finance Assignment for ABC Company
Instructions:
No Plagiarism, No Matching will be acceptable .clear and presented using APA Style Reference. All answers must be typed using Times New Roman ( Size12, Double-space)font. No pictures containing text will be acceptable and will be considered plagiarism. proper examples and explanations for each question. – No short answer as it’s not acceptable for this assignment the answer should be sufficient
Assignment Questions
Q1. ABC company is issuing eight-year bonds with a coupon rate of 6.5 percent and semiannual coupon payments. If the current market rate for similar bonds is 8 percent, what will be the bond price? If the company wants to raise $1.25 million, how many bonds does the firm have to sell? (1 mark)
Q2. You are interested in purchasing the common stock of Inch, Inc., which is currently priced at $ 40. The company is expected to pay a dividend of $3 next year and to grow at a constant rate of 8 percent.
- What should the market value of the stock be if the required rate of return is 15.75 percent? (1mark)
- Is this a good buy? Why or why not? (1mark)
Q3. Raneem owns shares in HP Inc. Currently, the market price of the stock is $36.34. Management expects dividends to grow at a constant rate of 6 percent for the foreseeable future. Its last dividend was $3.25. Raneem’s required rate of return for such stocks is 16 percent. She wants to find out whether she should sell his shares or add to her holdings.
- What is the value of this stock? (1 Mark)
- Based on your answer above, should Raneem buy additional shares in Honda Inc.? Why or why not? (1 Mark)