# FIN 571 Week 4 Connect Lab Solutions

Microhard has issued a bond with the following characteristics:

Par: $1,000

Time to maturity: 19 years

Coupon rate: 7 percent

Semiannual payments

Calculate the price of this bond if the YTM is

Assuming semiannual compounding, what is the price of a zero coupon bond with 22 years to maturity

paying $1,000 at maturity if the YTM is

Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5.6 percent paid

semiannually and 17 years to maturity. The yield to maturity of the bond is 6.1 percent.

What is the dollar price of the bond?

The next dividend payment by ECY, Inc., will be $2.12 per share. The dividends are anticipated to maintain

a growth rate of 8 percent, forever. The stock currently sells for $43 per share.

What is the required return?

Ayden, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.95 every year, in

perpetuity. This issue currently sells for $94 per share.

What is the required return?

The Starr Co. just paid a dividend of $1.40 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year, indefinitely. Investors require a return of 12 percent on the stock.

Miller Manufacturing has a target debt–equity ratio of .55. Its cost of equity is 15 percent, and its cost of debt is 7 percent. If the tax rate is 35 percent, what is the company’s WACC?

Filer Manufacturing has 7 million shares of common stock outstanding. The current share price is $73, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value $75 million, a coupon of 8 percent, and sells for 98 percent of par. The second issue has a face value of $55 million, a coupon of 9 percent, and sells for 107 percent of par. The first issue matures in 23 years, the second in 7 years

Titan Mining Corporation has 9.5 million shares of common stock outstanding and 390,000 5 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $43 per share and has a beta of 1.25, and the bonds have 15 years to maturity and sell for 114 percent of par. The market risk premium is 8.3 percent, T-bills are yielding 4 percent, and the company’s tax rate is 36 percent.