Calculation of Intrinsic Value of a Bond = ?

In our case this is perpetual bond because it is issued for infinite

time period
Formula of calculation of Intrinsic Value of a perpetual Bond
V = Interest / Required Rate
Putting values in the formula
First of all calculate interest = 1000 x 12%
                                          = 1000 x 12 / 100
                                          = 120
V = Interest / Required Rate
V = 120 / 15%
V = 800
M.P > Intrinsic Value
Intrinsic value of a perpetual bond is overvalued.

SOL2:
Calculation of Intrinsic Value of a Preferred Stock = ?
Formula of calculation of Intrinsic Value of a preferred stock
V= D/r
V= Dividend/Required rate
First of all calculate the value of dividend
Dividend = 80 X 10%
Dividend = 8
Putting values in equation
V = 8/15%
V = 53.33
M.P > Intrinsic value
Intrinsic value of preferred stock is overvalued

SOL3:
Calculation of Intrinsic value of a common stock with constant
growth = ?
Formula for calculation of intrinsic value of a common stock with
constant growth
V = D1 / r-g
D1 = Next years dividend
D1 = ?
D1 = D0 (1+g)
 D1 = 10 (1+5%)
 D1 = 10.5
Putting values in intrinsic value equation
V = D1 / r-g
V = 10.5 / 15% - 5%
V = 10.5 / 10%
V = 105
M.P < Intrinsic Value
So, Intrinsic value for common stock is undervalued.
According to calculations of three stocks we have concluded that
result Intrinsic value of common stock is preferable.
1. When Intrinsic value < market price it is not profitable
2. When intrinsic value > market price it is profitable
3. It is greater than market price only in common stock case and it is
undervalued
So, common stock with constant growth is recommended.