Sizo Business Solutions, an industrial business concern, is financed by equity, debtand preference stock. The company has 50 million outstanding shares with a par value of R1 each. The shares are listed on the stock exchange and recently paid a dividend of 220 cents. The dividend has been growing at a steady rate of 5 percent over the years, and market analysts believe this growth rate is sustainable and will therefore continue for the foreseeable future. The company's beta is 1. Sizo also has 100 000 bonds in issue. The debt is listed on the exchange, and currently trades at a yield-to-maturity of 8 percent. The debt has a par value of R1 000 each and pays a coupon of 10 percent per annum paid semi-annually. The debt has four years remaining to maturity. What is the value of Sizo Business total debt?

Sizo Business Solutions, an industrial business concern, is financed by equity, debtand preference stock. The company has 50 million outstanding shares with a par value of R1 each. The shares are listed on the stock exchange and recently paid a dividend of 220 cents. The dividend has been growing at a steady rate of 5 percent over the years, and market analysts believe this growth rate is sustainable and will therefore continue for the foreseeable future. The company's beta is 1. Sizo also has 100 000 bonds in issue. The debt is listed on the exchange, and currently trades at a yield-to-maturity of 8 percent. The debt has a par value of R1 000 each and pays a coupon of 10 percent per annum paid semi-annually. The debt has four years remaining to maturity. What is the value of Sizo Business total debt?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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XYZ Corporation's beta is calculated 1.20. The corporation paid $1.25 dividend last year. The growth rate in XYZ's earnings and dividends is estimated 25.00% for the next 5 years, after which the growth rate will be 2.00%. The risk-free rate of return is 3.00%, and XYZ's management estimates that the market return is 8.50%. Calculate the current common stock price of the corporation.
Tyres Limited has asked you to calculate the return on its ordinary shares to help in its calculation of its weighted average cost of capital (WACC). Tyres has 10,000,000 ordinary shares on issue that have a beta of 1.63. The last dividend was $9.56, and dividends have been growing at 2.7% per year. If the risk-free rate is 1.98% and the return on the market is 9.1%. What is the required return on one of Tyres’s ordinary shares?.
Snarklsh is a rapidly growing social media firm. It expects to grow at 15% for the next four years. After year four, growth will moderate at 5.5%. Snarkish expects to pay a dividend of $2.30 per share next year. If the firm's required return is 7.4% and current stock price is $95.72 per share, by how much is it over- or under-valued? Under-valued by $59.78 Over-valued by $65.46 Under-valued by $110.00 Over-valued by $60.92
Bob's Rawhide Company has a dividend payout ratio of 45%. Next year it will earn $0.75 per share and have a return on equity of 12%. The shareholders' required return is 8%. Calculate the company's growth rate of EPS. Using the earnings model, what is the value of the stock? Construct a data table that shows how the growth rate and value of the stock will change if the ROE ranges between 10% and 20%, in 1% increments. Now, using that data, create a scatter chart to show the relationship between the value of the stock and the ROE. Is the relationship linear? At what point does the model break down? Using the constant-growth model, what is the value of the stock?
Fesla just paid a dividend of $3.5 per share and it is expected to grow 16% each year for the next 3 years. After that, dividends will have a constant growth of 3% annually. The required rate of return for this stock is 10%. Given this information, what would be the share price for this firm? Round your answer to two decimals and enter your answer in the box below. You Answered 72.08 Correct Answer 60.4 margin of error +/- 0.5
Musical Chipmunks Co. just paid a dividend of $2.75 per share. The analysts consensus is that its dividends will be increased by 3% per year, forever. Calculate Musical Chipmunks dividends per share in years 1, 2 and 3. Also calculate the intrinsic value of a share of Musical Chipmunks Co. today, For this problem, assume a market capitalization rate (k) (of 10%.
KK's Inc. stock is currently selling at $45.83 per share. The last dividend paid (D0) was $2.50. KK Inc. is a constant growth firm. If investors require a return of 16 percent on KK's stock, what do they think KK's growth rate will be?
Little Oil has outstanding 1 million shares with a total market value of $29 million. The firm is expected to pay $1.00 million of dividends next year, and thereafter, the amount paid out is expected to grow by 5% a year in perpetuity. Thus, the expected dividend is $1.05 million in year 2, $1.1025 million in year 3, and so on. However, the company has heard that the value of a share depends on the flow of dividends, and therefore, it announces that next year's dividend will be increased to $2 million and that the extra cash will be raised immediately afterward by an issue of shares. After that, the total amount paid out each year will be as previously forecasted, that is, $1.05 million in year 2 and increasing by 5% in each subsequent year. A. At what price will the new shares be issued in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. B. How many shares will the firm need to issue? Note: Do not round intermediate calculations. Round your…
KK's Inc. stock is currently selling at $45.83 per share. The last dividend paid (D0) was $2.50. KK Inc. is a constant growth firm. If investors require a return of 16 percent on KK's stock, what do they think KK's growth rate will be?
Richard Adkerson, CEO of Freeport McMoRan (ticker symbol: FCX), expects his company’s dividends to constantly grow by 3.4% annually. Today, one share of FCX is worth $30.50 and investors holding the stock require a return of 10.5%. Next year, FCX annual dividend will be: a. $2.09 b. $1.96 c. $2.17 d. $2.39 e. $2.24
QuickRunners Co. is currently selling for $50.00 per share. The company expects to pay a dividend of $3.50 per share in a year. For the remainder of the company’s life, dividends are expected to grow at a constant rate, and investors are expected to require a 9% return to invest in QuickRunners Co. stock. What is the dividend growth rate using the constant growth model

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