Essay About Past Year And Current Price

Corporate Finance Homework2
Corporate Finance Homework2
1、A. For Bond A, the current price is:[pic 1]For Bond A, the current price is:[pic 2]B. Since the yield to maturity remains 9%, we can say that during the past year,[pic 3]For Bond A, since there is no cash dividend, the current yield and capital gains yield are:[pic 4]For Bond B, the cash dividend is $100, so the current yield and capital gains yield are:[pic 5][pic 6]C. For Bond A, at the end of year, the price will be:[pic 7]Thus, the ROR over the year will be:[pic 8]For Bond B, at the end of year, the price will be:[pic 9]Thus, the ROR over the year will be:[pic 10]2、A. If the firm remains to pay out all its earnings as dividends, using the dividend discount model, we can define the price as:[pic 11]Thus, Cogent Consultant’s stock price will be $56.4.B. If the firm remain 60% of its earning, first, we can find the original $8.46 distributed will decline to $8.46*40% every year, the else will generate $8.46*60%*20% every year. Using NPVGO model, suppose in year i, the dividend distributed is , then, in the next year, the distributed dividend will be:[pic 12][pic 13]Then, we can derivate that the stock price will be:[pic 14]Thus, Cogent Consultant’s stock price will be $112.8.3. Suppose the bid price is P dollar per stamp to keep NPV equals zero. Then, the cash flow during those 7 years can be concluded as the below graph.Year0123451Revenue30,000,000*P30,000,000*P30,000,000*P30,000,000*P30,000,000*P2COGS480,000480,000480,000480,000480,0003Fixed cost500,000500,000500,000500,000500,0004D&A300,000300,000300,000300,000300,0005EBT(1-2-3-4)6Tax (5*34%)7EAT (5-6)8Operating CF (7+4)9Installing plant-2,100,00010Net salvage value700,000-(700,000-600,000)*34%11[pic 15]-600,000600,00012Investing CF (9+10+11)13Total CF (9+12)14Discount rate15Discount factor16Discounted CF (13*15)17NPV0Using this graph and EXCEL, we can calculate that: