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Finance True/ False and Other problems




Question;True/False1. A company that is guaranteed to pay dividends can have a positive value.2. Forecasting cash flows has no significant risks.3. Discount rate is a synonym for coupon rate.4. Bond prices are inversely related to their time to maturity.8. Adam Clayton wants to sell stock to raise capital. He plans to issue a dividend of$7.00 next year and growing at a 4% rate forever. What is the intrinsic valueof this stock if the discount rate is 8%?9. INXS Corporation, a maker of ?What You Need?, just paid a dividend of $2.00.The dividends have a constant growth rate of 10%. The required rate of return onthis firm is 16%. What is the intrinsic value of a share of this stock?10. Bueller, Inc. has a 30 year bond that has existed for 10 years, a coupon rate of10%, and a required rate of 10%. Assuming a face value of $1000, what is theintrinsic value of the bond? What if the required rate was 6%? What if therequired rate was 14%?11. A new 10 year bond has a coupon rate of 25%. The bond is nine years old and hasa required rate of return of 10%. The face value is $1000. What is the intrinsic valueof the bond?13. A potential project has the following expected cash flows.t012345CF-500 150220-80360100Assuming a discount rate of 10% please calculate Net Present Value, Payback,and Discounted PaybackFormula SheetPV*(1+r)tFV/(1+r)t(1+r)t ? 1 * CFr1 ? 1/(1+r)t * CFrCF/rD1/(r-g)


Paper#50109 | Written in 18-Jul-2015

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