Finance Excel Spreadsheet Question help
Separate sheet for each problem.
18. ;
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The company of Arifin, Chigurapati, Hilliard, O’Brien and Oaks (ACHOO) is presently enjoying abnormally high growth because of a surge in the demand for their services. ; The company expects earnings and dividends to grow at a rate of 20% for the next 4 years, after which there will be no growth (g = 0) in earnings and dividends. ; The company’s last dividend, D0, was $1.50. ; ACHOO’s beta is 50% higher than that of the average stock, the market risk premium is 6%, and the risk-free rate is 4%. ; Determine the current price of the common stock.
19. ;
(a) Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. ; The bond currently sells for $900.90, and the company’s tax rate is 40%. ; What is the component cost of debt for use in the WACC calculation?
(b) Haverford uses debt, common equity and preferred stock in their capital structure. ; Using the following information AND the cost of debt calculated in part (a) above, determine the WACC for the company: (8pts) ;
- Preferred Dividend is $2.50 per share
- Price of Preferred is $22.72
- Weight of Debt is 40% and Weight of Equity is 45%
- Haverford estimates the cost of equity based on their debt yield plus a risk premium of 5.5
There is a bond with 19 years remaining until maturity. ; The bond pays a coupon of $45 every six months and has a yield to maturity of 6.77%.
There is a second bond also with 19 years remaining until maturity. ; This bond pays a $10 coupon every six months and has a yield to maturity of 6.77%.
If the yield to maturity for these bonds increases by 1% over the next year, what will the percentage change in bond price be for both of them over the course of the year?
