Fin 072

Quiz # 2
January 23, 2024

I. Calculate the value of the bonds listed below:

Coupon Years to Required Rate of

Bond Par Value
Rate Maturity Return
M PhP 1,000.00 10% 10 12%
A PhP 500.00 13% 5 10%
S PhP 100.00 9% 8 9%
T PhP 1,000.00 12% 12 10%
G PhP 300.00 8% 20 11%

II. Dinagyang Foundation, Inc. has paid dividends of P2.10 per share and has
maintained this amount year after year without any growth for the past 10 years.
MTG purchased 1,000 shares of stocks from Dinagyang when the required rate of
return was 12%. After 10 years, MTG wanted to sell ½ of the stocks when the
required rate of return went down to 9%. Compute the capital gains or loss of MTG
if the sale of stocks pushes through. Show all computations.

III. For each of the following firms, compute the value of the firm’s stocks using the
constant growth Valuation model.

Dividend
Required Rate of
Firm Expected Next Par Value Growth Rate
Return
Year
A PhP 2.20 12 5% 12
B 3% of Par 10 4% 15
C .50 50 7% 14
D .90 5 8% 10
E 5 of par 20 5% 8

IV. For each of the following firms, compute the value of the firm’s stocks following the
Variable Growth Valuation Model.

Initial growth Period

Growth Rate@ Required
Dividend Years Years Years Years the end of the Rate of
Firm
at time 0 1-2 3-4 1-3 4-5 initial Growth Return
period
A 3.00 6% 7% 5% 10%
 B 2.50 8% 5% 4% 12%
C .70 3% 5% 7% 11%
D 1.80 4% 5% 8% 9%
E 5.00 10% 7% 3% 6%

V. Compute the Value of Preferred Stocks of the following Firms. Show all
computations.

Dividend
Required Rate of
Firm Expected Next Par Value Growth Rate
Return
Year
U PhP 5.20 12 4% 11
V 5% of Par 10 5% 14
W 2.50 50 8% 10
X 3.90 5 7% 9
Y 3% of par 20 3% 6

END OF QUIZ