Reddick Enterprises’ stock currently sels for $35.50 per share. ‘The dividend is projected to increase ata ‘constant rate of 5.50% peryear. ‘The required rate of return on the stock, 15, 9.00%. What i the stock's ‘expected price 3 years from today? Assume that you are considering the purchase ofa 15-year bond with an annual coupon rate of 9.5%. The bond has face value of $1,000 and makes semiannual interest payments. Ifyou require an 11.0% nominal yield to maturity on this investment, what isthe maximum price you should be willing to pay for the bond? In order to accurately assess the capital structure of a firm, itis necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) $10, 000, 000, Preferred stock 2,000, 000 Common stock ($10 par) 10, 000, 000 Retained earnings 4,000, 000 Total debt and equity 326,000,000 “The bonds have a 4.0% coupon rate, payable semiannually, and a par value of $1,000, ‘They mature ‘exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. Whats the ‘current market value of the firm's debt? ‘You have a chance to buy an annuity that pays $550 atthe beginning of each year for 3 years. You could ‘ear $.5% on your money in other investments with equal risk. What isthe most you should pay for the annuity a. $1412.84 b. $1,487.20 c. $1,565.48 a. $1,643.75 fe. $1,725.94 LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted ina new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant?