ASSIGNMENT 2MGF 301Corporation FinanceSpring 2010DUE: Tuesday, February 16th at 3:00pm in Jacobs 365 You may in a group of up to 4 on this Assignment. Please indicate clearly on all submitted Assignments who the members of the group are. Please note, all assignments submitted with more than 4 group members will automatically receive a 0 grade. No late assignments will be accepted. You may hand in the assignment in person in Jacobs 365 (put it under the door if no one is there) or submit it by email to the Digital Dropbox on UBLearns before the time it is due. All email submissions must be to the Digital Dropbox (go to Control Panel, Digital Dropbox and hit “Send file”). Note: Do not use the “#” symbol in your file name!________________________________________________________________________________________________________Answer all of the following questions. For each answer, show your work.1. Common Products has issued its $.001 par value stock in two separate financing transactions. First, ten years ago, the founder of the company purchased 2,000,000 sharesof stock for $100,000. Second, the company went public last year by issuing 4,000,000 shares of stock to the public for a total of $15 million in cash received. Use this information to fill in the following table:Common shares (par value) ____________________Additional paid-in capital ____________________Retained Earnings ____________________Net Equity $17,500,0002. A $1,000 face value bond of Acme Inc. pays an annual coupon, carries a coupon rate of 5.75%, has 8 years to maturity, and sells at a yield to maturity of 7.5%.(a) What interest payments do bondholders receive each year?(b) At what price does the bond sell?(c) What is the bond price if the yield to maturity falls to 6%?3. A 40 year maturity bond with a coupon rate of 8.25% and face value of $1,000 makes semi-annual coupon payments. What is the bond’s yield to maturity if the bond is selling for:(a) 900?(b) 1,000?(c) 1,100?4. Large Industries annual bonds are selling at 98 (i.e., the price is $980 for the $1,000 bond). There are 6 years remaining until maturity on the bonds and the yield to maturity is 6.25%. Find the coupon rate.5. Below are the data for two stocks, both of which have a discount rate of 10 percent. Stock A Stock BReturn on equity 13% 15%Earnings per share $2.00 $1.50Dividends per share $ 1.10 $.60a. What are the dividend payout ratios for each firm?b. What are the expected dividend growth rates for each firm?c. What is the estimated stock price for each firm?d. Which company has a larger market value?6. You have forecast that United Sports, Inc. will pay a dividend of $1.50 next year (in year 1) and $2 two years from now (in year 2). For dividends beyond two years, you assume they will increase at 5% per year from the prior year. If the discount rate is 11%, calculate a fair price for the stock of United Sports,
View Full Document
Unlocking...