NYC Company has decided to make a major investment. The ...

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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

[AISCAMPING]

Answer to Question 1

D

Answer to Question 2

Answer: B
Explanation: B) The answer is found through an iterative (trial and error) process using the bond pricing formula.
Bond Price = PMT  + ;
938.45 = 150  + ;
r = 16.70.
MODE = END, P/Y = 1, C/Y = 1
INPUT 6 ? -938.45 150 1,000
KEY N I/Y PV PMT FV
CPT 16.70