Work Shown

A5. (Yield to maturity) New Jersey Lighting has a 7% coupon bond maturing in 17 years. The current market price of the bond is $975. What is the bond’s yield to maturity?

A11. (Expected return) Northern States Power has a projected dividend of $3.60 next year. The current stock price is $50.50 per share. If the dividend is projected to grow at 3.5% annually, what is the expected return on Northern States stock?

A16. (Growth rate) Suppose Toshiba has a payout ratio of 55% and an expected return on its future investments of 15%. What is Toshiba’s expected growth rate?

B2. (Yield to maturity) GMAC’s 8.75% bonds closed yesterday at $952.50. If these bonds mature in 11 years, what is the yield to maturity of these bonds? What is their APY?

C3. (Supernormal growth model) Managers of The Biden
Time Co., makers of Mickey Moose watches, are curently considering suspending the firm’s cash dividends for the next three years to invest the money in a project they call Court Jesters. Biden
Time’s current operations are expected to earn $0.85 per share next year and with a constrant payout ratio of 75% are expected to grow at 5% per year forever. Under the propsoed Court Jesters plan, earnings are expected to grow at 17% per year for the investment years. After the investment, the firm expects to have a payout ratio of 70% and a growth rate in earnings of 6.5% forever. If the required return on Biden
Time’s stock is 20% per year, what is the NPV per share of the Court Jesters plan?