What is the value of a bond that has a par value of 1,000, a coupon of 120 (annually), and matures
in 10 years? Assume a required rate of return of 7.02.
A) 1,198.45 B) 1,349.45 C) 1,284.38 D) 1,200.78
Question 2
Sentry Manufacturing paid a dividend yesterday of 5 per share (D0 = 5 ). The dividend is
expected to grow at a constant rate of 8 per year. The price of Sentry Manufacturing's stock today
is 29 per share.
If Sentry Manufacturing decides to issue new common stock, flotation costs will
equal 2.50 per share. Sentry Manufacturing's marginal tax rate is 35. Based on the above
information, the cost of retained earnings is
A) 28.38. B) 31.40. C) 24.12. D) 26.62.
