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- Buckeye Industries has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company's assets is currently $1,230. The CEO believes that the assets in the company will be worth either $920 or $1,440 in a year. The going rate on one-year T-bills is 6 percent. a-1. What is the value of the company's equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. What is the value of the debt? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete and correct. 306.37 928.51 a-1. Value of equity a-2. Value of debt $ $ Suppose the company can reconfigure its existing assets in such a way that the value in a year will be $940 or $1,740. b. If the current value of the assets is unchanged, what is the new value of the company's equity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but…Mark Motel's debt has a face value of $40 million, a coupon rate of 14% (paid semiannually), and expires in 12 years (at t = 12 . The current annual yield-to-maturity (stated) for all bonds of the company is 15%. Mark wishes to conserve cash for the next few years. To do this, Mark decides to issue new equity and use the proceeds to purchase the existing debt at the market price. The current stock price of Mark is $60 and there are 2 million shares outstanding. 1. How many shares should Mark issue to purchase the existing debt? Assume the decision to purchase the bond does not change the stock price. Instead, the company decides to issue a zero-coupon bond that matures at year 5, and use the proceeds to purchase the existing debt at the market price. 2. What is the face value of the zero-coupon bond that Mark needs to issue?The board of directors has just granted Mr. Levin at-the-money European call options on the company’s stock., which is currently trading at $55 per share. The stock pays no dividends. The options will expire in 5 years, and the standard deviation of the returns on the stock is 45%. Treasury bills that mature in 4 years currently yield a continuously compounded interest rate of 7%. Use the Black-Scholes model to calculate the value of the stock option. Use excel and share the formula template.
- An investor pays $30,000 for a convertible bond (one that can be converted into shares of corporate common stock). The bond conversion rate is 100 shares of stock anytime within the next five years. What will the stock price have to be in year 3 in order for the investor to make 10% per year on the investment? Assume the bond interest rate is 4% per year payable annually.The stock of the Health Corporation is currently selling for Rs.20 a share and is expected to pay a Rs.1 dividend at the end of the year. If you bought the stock now and sold it for Rs.23 after receiving the dividend, what rate of return would you earn? Q 2 Gonzalez Electric Company has outstanding a 10 percent bond issue with a face value of Rs.1,000 per bond and three years to maturity. Interest is payable annually. The bonds are privately held by Suresafe Fire Insurance Company. Suresafe wishes to sell the bonds and is negotiating with another party. It estimates that, in current market conditions, the bonds should provide a (nominal annual) return of 14 percent. What price per bond should Suresafe be able to realize on the sale?cullumber, inc has a bond issue maturing in seven years that is paying a coupon rate of 7.5 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. if it can refinance at 6 percent, how much will cullumber pay to buy back its current outstanding bonds? Assume face value is $1000.
- The Virginia Corporation recently issued 10-year bonds at a price of $1,000. These bonds pay $60 in interest each six months. Their price has remained stable since they were issued. i.e. they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000 and pay $40 in interest every six months. If both bonds have the same yield, how many new bonds must the company issue to raise $2,000,000 cash?You are offered to buy a 4-year coupon corporate bond in the beginning of its 7th month on its third year for $963.94. Its face value is $1,000 and its coupon rate is 5.172% p.a. with coupon paid at the end of each quarter. Government bond rate now is 6.9%. (A) The company just paid a $1.48 annual dividend and announced the plans to pay $1.54 next year. The dividend growth rate is expected to remain constant at the current level for the following 4 years and then settle at 3 percent per year. If you are planning to buy this stock in two years’ time, how much would you expect to pay for it if the required rate of return is 7 percent at the time of your purchase? (Use two decimal rounding)Preissle Company wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $54. The warrants expire in 5 years. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00. The company’s stock is expected to grow at 7% indefinitely. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? a. 7.83% b. 8.24% c. 8.65% d. 9.08% e. 9.54%
- cullumber, inc has a bond issue maturing in seven years that is paying a coupon rate of 9.0 percent (semiannual payments). Management wants to retire a portion of the issue by buying the securities in the open market. if it can refinance at 7.5 percent, how much will cullumber pay to buy back its current outstanding bonds?Jacob Engineering sells $300,000 of bonds to investors. The bonds have an 7% coupon rate and interest is paid semiannually. The bonds were sold to yield 10%. What periodic interest payment does Jacob Engineering make to its investors?Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the annual interest payment of Petty Partners bonds ? Please answer fast i give you upvote.