Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Bato Co is currently estimating the value of its securities given the following information:
- Government securities currently trade at 4.5%
- Credit spread for Bato Co is estimated as follows based on its maturity
- 3 year maturity - 3.5%
- 4 year maturity - 5.0%
- 5 year maturity - 6.0%
- Based on current estimates the Beta of Bato is estimated at 0.75
- Market risk premium for equity instruments is estimated at 6.5%
The following summarizes the instruments currently issued by Bato:
- Bond Graphite - Php500,000 face value bond with a 5-year tenor carrying 8.0% coupon issued two years ago
- Bond Quartz - Php750,000 face value bond with a 4-year tenor carrying 8.0% coupon issued just today
- Bond Marble - Php1,000,000 face value bond with a 5-year tenor carrying a 12.0% coupon issued last year
- 10,000 common shares - Bato just declared a dividend of Php2.50 per share and is expected to grow by 20% over the next five years before slowing down to 5% beginning year 6
23. How much is the value of Bond Marble?
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