Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,200, $10,200, and
1 answer:
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Answer:
The price of the bond is $1000. Thus, option a is the correct answer.
Explanation:
The price of a bond is calculated using the present value of the interest payments made by the bond, which is in the form of an annuity, plus the present value of the face value of the bond. The present value is calculated by discounting the annuity of interest and the face value by the YTM or yield to maturity. In case YTM is not provided, we assume that it is same as or equal to the coupon rate paid by the bond.
The formula for the price of the bond is attached.
Bond Price = 25 * [(1 - (1+0.025)^-8) / 0.025] + 1000 / (1+0.025)^8
Bond Price = $1000
Answer:
The answer is $15,656
Explanation:
Formular: P = D *
P represent estimated stock price or value = ?
D represent last dividend paid = $152
k represent discount rate = 0.04
g represent growth rate = 0.03
Using the fomular above; P = $152 *
P = $152 *
P = $152 * 103 = $15,656
:. The fundamental value of the stock market would be $15,656