FIN 419 Week 4 Activity Latest 2016 Version

May 28th, 2016
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FIN Week 4 Activity Set 2016 Version Questions 1. Assume that the Financial Management Corporation’s $1,000-par-value bond had a 6.500% coupon, matured on May 15, 2020, had a given current price quote of 110.418, and had a yield to maturity (YTM) of 5.255%. Given this information, answer the following questions: a. What was the dollar price of the bond? b. What is the bond’s current yield? c. Is the bond selling at par, at a discount, or at a premium? Why? d. Compare the bond’s current yield calculated in part b to its YTM and explain why they differ 2. Use the constant-growth model (Gordon Model) to find the value of each firm shown in the following table. Dividend Expected Dividend Growth Required Return 3. Grey Products has fixed operating costs of $389,000, variable operating costs of $16.51 per unit, and a selling price of $62.02 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm’s EBIT at 11,000, 12,000, and 13,000 units, respectively.

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Assume that the Financial Management Corporations $1,000-par-value bond had a 6.500% coupon, matured on May 15, 202price quote of 110.418, and had a yield to maturity (YTM) of 5.255%. Given this information, answer the following questions:a. What was the dollar price of the bond?b. What is the bonds current yield?c. Is the bond selling at par, at a discount, or at a premium? Why?d. Compare the bonds current yield calculated in part b to its YTM and explain why they differpar valuecouponprice quoteYTMabcd10006.5110.4185.255Dollar PriceCurrent YieldBond is Selling atYTM is651104.185.89%Premium because its price isGreaterLowerbecause former includes104.18 in priceupon, matured on May 15, 2020, had a given currentnswer the following questions:DepreciationUse the constant-growth model (Gordon Model) to find the value of each firm shown in the following table.Dividend DividendRequiredExpected growth rate Return$1.219.50%13.90%Valus of the Stock27.5lowing table.Grey Products has fixed operating costs of $389,000, variable operating costs of $16.51 per unit, and a selling price of $62.02a. Calculate the operating breakeven point in units.b. Calculate the firms EBIT at 11,000, 12,000, and 13,000 units, respectively.c. With 12,000 units as a base, what are the percentage changes in units sold and EBIT assales move from the base to the other sales levels used in part b?d. Use the percentages computed in part c

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