NYC Company has decided to make a major investment. The investment will require a substantial early cash outflow, and inflows will be relatively late.
As a result, it is expected that the impact on the firm's earnings for the first 2 years will cause a negative growth of 5 annually. Further, it is anticipated that the firm will then experience 2 years of zero growth, after which it will begin a positive annual sustainable growth of 6. If the firm's required return is 10 and its last dividend, D(0), was 2 per share, what should be the current price per share?
A) 32.66
B) 47.83
C) 53.64
D) 38.48
E) 42.49
Question 2
The Douglas Dynamics Corporation 1,000 par value, 15 annual coupon bonds, have 6 years remaining to maturity and are currently selling for 938.45. What is the firm's yield to maturity for these bonds?
A) 15.00
B) 16.70
C) 16.66
D) 15.47
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