A 25-year, 8% semiannual coupon bond with a par value of \$1,000 may

A 25-year, 8% semiannual coupon bond with a par value of \$1,000 may be called in 4 years at a call price of \$1,100. The bond sells for \$950. (Assume that the bond has just been issued.)

a. What is the bond’s yield to maturity? Round your answer to two decimal places. %

b. What is the bond’s current yield? Round your answer to two decimal places. %

c. What is the bond’s capital gain or loss yield? Round your answer to two decimal places. %

d. What is the bond’s yield to call? Round your answer to two decimal places. %

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby’s common stock sells for \$20.75 per share, its last dividend was \$1.50, and the company will pay a dividend of \$1.59 at the end of the current year.

a.Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. %

b. If the firm’s beta is 1.0, the risk-free rate is 5%, and the expected return on the market is 12%, then what would be the firm’s cost of equity based on the CAPM approach? Round your answer to two decimal places. %

c.If the firm’s bonds earn a return of 11%, and analysts estimate the market risk premium is 3 to 5 percent, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range). %

d.On the basis of the results of parts a through c, what would be your estimate of Shelby’s cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.