Middleton Expects to Buy a 9.5% Coupon, 15 years Bond Today When It is First Issued by Alex PLC: Accounting Assignment, CSU, Australia
a. Middleton expects to buy a 9.5% coupon, 15 years bond today when it is first issued by Alex PLC. If interest rates suddenly rise to 12.5%, what happens to the value of Middleton’s bond? Why? (Word limit 20 – 30 words)
b. A corporate bond has a face value of $1 000, a coupon rate of interest of 10.5% per annum, payable semi-annually, and 20 years remaining to maturity. The market interest rate for bonds of similar risk and maturity is currently 8.5% per annum.
- What is the coupon payment of the bond?
- What is the present value of the bond?
- If the coupon payment is payable annual (based on the same information), what is the value of the bond?
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a. Briefly discuss the relationship between the following: (Word limit 50-70 words)
- Share price and investors required rate of return
- Share price and dividend growth rate.
b. Otama LTD has an issue of preference shares outstanding that pays a $2.85 dividend every year. If this issue currently sells for $77.32 per share, what is the required return?
c. Price Tigers LTD expects to pay a $3.25 per share dividend next year. The company pledges to increase its dividend by 5.1% per year, indefinitely. If you require a return of 11% on your investment, how much will you pay for the company’s share?
The cash flows shown below were extracted from the accounts of Jason Taylor, a music shop owner.
- Prepare a statement of cash flows using the direct method.
- Outline some cash flow warning signals.
Selected information for two companies competing in the catering industry is presented in the table below:
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a. Calculate the following ratios for Lawson and Dawson:
- Current ratio.
- Return on Assets (ROA).
- Return on Equity (ROE).
b. From your calculations in Part (a), explain which entity is in a more favorable position.
c. Discuss two limitations of ratio analysis as a fundamental analysis tool.
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